Riaz Haq writes this data-driven blog to provide information, express his opinions and make comments on many topics. Subjects include personal activities, education, South Asia, South Asian community, regional and international affairs and US politics to financial markets. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://southasiainvestor.blogspot.com and a YouTube video channel https://www.youtube.com/channel/UCkrIDyFbC9N9evXYb9cA_gQ

Monday, September 27, 2010

A Brief History of Pakistani Economy 1947-2010

Pakistani economy grew at a fairly impressive rate of 6 percent per year through the first four decades of the nation's existence. In spite of rapid population growth during this period, per capita incomes doubled, inflation remained low and poverty declined from 46% down to 18% by late 1980s, according to eminent Pakistani economist Dr. Ishrat Husain. This healthy economic performance was maintained through several wars and successive civilian and military governments in 1950s, 60s, 70s and 80s until the decade of 1990s, now appropriately remembered as the lost decade.

In the 1990s, economic growth plummeted to between 3% and 4%, poverty rose to 33%, inflation was in double digits and the foreign debt mounted to nearly the entire GDP of Pakistan as the governments of Benazir Bhutto (PPP) and Nawaz Sharif (PML) played musical chairs. Before Sharif was ousted in 1999, the two parties had presided over a decade of corruption and mismanagement. In 1999 Pakistan’s total public debt as percentage of GDP was the highest in South Asia – 99.3 percent of its GDP and 629 percent of its revenue receipts, compared to Sri Lanka (91.1% & 528.3% respectively in 1998) and India (47.2% & 384.9% respectively in 1998). Internal Debt of Pakistan in 1999 was 45.6 per cent of GDP and 289.1 per cent of its revenue receipts, as compared to Sri Lanka (45.7% & 264.8% respectively in 1998) and India (44.0% & 358.4% respectively in 1998).

After a relatively peaceful but economically stagnant decade of the 1990s, the year 1999 brought a bloodless coup led by General Pervez Musharraf, ushering in an era of accelerated economic growth that led to more than doubling of the national GDP, and dramatic expansion in Pakistan's urban middle class.

Per Capita PPP GDP

Pakistan became one of the four fastest growing economies in the Asian region during 2000-07 with its growth averaging 7.0 per cent per year for most of this period. As a result of strong economic growth, Pakistan succeeded in reducing poverty by one-half, creating almost 13 million jobs, halving the country's debt burden, raising foreign exchange reserves to a comfortable position and propping the country's exchange rate, restoring investors' confidence and most importantly, taking Pakistan out of the IMF Program.

The above facts were acknowledged by the current PPP government in a Memorandum of Economic and Financial Policies (MEFP) for 2008/09-2009/10, while signing agreement with the IMF on November 20, 2008. The document clearly (but grudgingly) acknowledged that "Pakistan's economy witnessed a major economic transformation in the last decade. The country's real GDP increased from $60 billion to $170 billion, with per capita income rising from under $500 to over $1000 during 2000-07". It further acknowledged that "the volume of international trade increased from $20 billion to nearly $60 billion. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves to $14.3 billion at end-June 2007. Buoyant output growth, low inflation, and the government's social policies contributed to a reduction in poverty and improvement in many social indicators". (see MEFP, November 20, 2008, Para 1)

The decade also cast a huge shadow of the US "war on terror" on Pakistan, eventually turning the nation into a frontline state in the increasingly deadly conflict that shows no signs of abating. Along with the blood and gore and chaos on the streets, there are hopeful signs that rule of law and accountability is beginning to prevail in the country with the restoration of representative democracy and independent judiciary, largely in response to an increasingly assertive urban middle class, vibrant mass media and growing civil society.

The Zardari-Gilani government inherited a relatively sound economy on March 31, 2008. It inherited foreign exchange reserves of $13.3 billion, exchange rate at Rs62.76 per US dollar, the KSE index at 15,125 with market capitalization at $74 billion, inflation at 20.6 per cent and the country's debt burden on a declining path. The government itself acknowledged in the same document that "the macroeconomic situation deteriorated significantly in 2007/08 and the first four months of 2008/09 owing to adverse security developments, large exogenous price shocks (oil and food), global financial turmoil, and policy inaction during the political transition to the new government". (Para 3 of the MEFP, November 20, 2008.

Why is it that Pakistani economy has done well under military governments and performed poorly when led by politicians? To put it all in perspective, let's recall how late Dr. Mahbub ul-Haq, the renowned Pakistani economist who is credited with the idea of UNDP's human development index (HDI), explained the corrosive impact of political patronage on economic policy in Pakistan.

In a 10/12/1988 interview with Professor Anatol Lieven of King's College and quoted in a recent book "Pakistan-A Hard Country", here is what Dr. Haq said:

"..every time a new political government comes in they have to distribute huge amounts of state money and jobs as rewards to politicians who have supported them, and short term populist measures to try to convince the people that their election promises meant something, which leaves nothing for long-term development. As far as development is concerned, our system has all the worst features of oligarchy and democracy put together. That is why only technocratic, non-political governments in Pakistan have ever been able to increase revenues. But they can not stay in power for long because they have no political support...For the same reason we have not been able to deregulate the economy as much as I wanted, despite seven years of trying, because the politicians and officials both like the system Bhutto (Late Prime Minister Zulfikar Ali Bhutto) put in place. It suits them both very well, because it gave them lots of lucrative state-sponsored jobs in industry and banking to take for themselves or distribute to their relatives and supporters."

What went wrong? Why one of the fastest growing economies in the Asian region until two years ago has been totally forgotten in the region? Firstly, the speed and dimension of exogenous price shocks (oil and food) were of extraordinary proportions. Secondly, the present government found itself totally ill-prepared and clueless in addressing the challenges arising out of the shocks. While rest of the world was taking corrective measures and adjusting to higher food and fuel prices, Pakistan lurched from one crisis to another.

Despite peaceful election and a smooth transition to a new government, political instability persisted. For a protracted period there were no finance, commerce, petroleum and natural resources and health ministers in the country. The government lost six precious months in finding its feet. It gave the impression of having little sense of direction and purpose. A crisis of confidence intensified as investors and development partners started to walk away. The stock market nosedived, capital flight set in, foreign exchange reserves plummeted and the Pakistani rupee lost one-third of its value. In short, Pakistan's macroeconomic vulnerability had grown unbearable. It had no option but to return to the IMF for a bailout package. There were no Plan A, B and C. There was only one plan, that is, to return to the IMF.

While the country was moving rapidly towards the IMF, the ministry of finance had prepared the plan to bring $4 billion by June 30, 2008 through four transactions. A kick-off meeting was scheduled on April 23, 2008 at the ministry to give a final touch to the various roadshows. These transactions were canceled on April 20, 2008. Who ordered the cancellation of $4 billion transaction? This cancellation prompted balance of payment crisis and the rest became history.

The economy continues to remain in intensive care unit and is barely breathing thanks to the injection of funds from the IMF, World Bank and Asian Development Bank. The economy is not on the radar screen of the government and as such the economic managers have no relevance in the current political set up. The exit of Shaukat Tarin is a classic example. At least he tried his best to inject financial discipline but paid the price of teaching prudent financial management.

Since Tarin's departure, Abdul Hafeez Shaikh has assumed the position of finance minister. It is still early to judge him, as the economy has suffered yet another major jolt from the widespread devastation caused by recent floods. This has added to the already extreme challenge Pakistan's leadership faces in bringing political and economic stability to the nation.

>> "they gave us the lost decade of the 1990s and again the worst performance since 2008."

Well, may be; But its not the complete picture. A lot of things happened post Musharraf.

1. Post 9/11 circumstances

In the immediate aftermath of 9/11 and US attack on Afghanistan, US gave $15 billion in aid to Pakistan*, a amount large enough to boost the GDP (for short term). Although, the affect the war had on Pakistan economy is a separate story, and is perhaps far more tragic.

2. Economic slowdown of 2008

Yes, Musharraf left Pakistan economy in decent shape. But his exit also was at the time of economic slowdown. No economy escaped its influence. As a matter of fact most currencies lost their value as opposed to Dollar in that period - a trend that is reversing recently, at least for Brazilian Real, Indian Rupee and many others.

3. Dynamics of US Aid

Its unfortunate to tie aid and external disturbance, but this has been the nature of aid to Pakistan. Between 1991-2000 when role of US in Afghanistan reduced to minimal (Era of Taliban control), Pakistan just received $429 million in aid*, as opposed to $5 billion in the previous decade, and more than $9 billion in the next. Further, Pressler amendment (passed in 1985) began hurting Pakistan by the 90's. There are quite a few empirical research papers demonstrating how Pressler amendment in US almost led to the collapse of Pakistan economy, where it reduced American aid to Pakistan significantly.

As a matter of fact some economists even argue that there is a bigger chance of Pakistan collapsing in short term with immediate termination of US aid to Pakistan, in case of an exit from Afghanistan. Although, no one can deny that overall this dependence on US aid has caused more long term damage to Pakistan's economy.

anon: "In the immediate aftermath of 9/11 and US attack on Afghanistan, US gave $15 billion in aid to Pakistan*"

I know a lot of figures thrown around and great credit given to US aid to explain Pakistan's economic performance from 2001-2007.

What is often forgotten in all of this are the following facts:

1. Pakistan's FDI dramatically increased during this period. Former US Federal Reserve Chief Alan Greenspan said in his book titled "The Age of Turbulence" : “But clearly the Licence Raj (in India) has discouraged foreign direct investment. India received $7 billion in FDI in 2005, a sum dwarfed by China’s $72 billion. India’s cumulative stock of FDI at 6 per cent of GDP at the end of 2005 compares with 9 per cent for Pakistan, 14 per cent for China, and 61 per cent for Vietnam.

2. Pakistan dramatically reduced its dependence on external debt. Pakistan's total public debt declined dramatically from 100% of GDP to about 50% of GDP during this period.

3. The foreign aid to Pakistan has increased in terms of absolute dollars in 2010, but significantly declined as a percent of GDP over the last decade.

Pakistan received $5 in aid per capita in 1960s, and it has now increased to $15 per capita, according to the world bank.

But Pakistan's per capita GDP has risen from less than $300 to about $3000 during this period, making foreign aid a minute percentage of total GDP.

4. Remittances by overseas Pakistanis soared, and are still continuing to increase to new records, expected to pass $10 billion this year.

Floods, protests, terrorism and war is not helping the small businessman. last 2 months many shops in Karachi were closed for 25 days total because of floods and unrest. I can survive but my workers and their families have no money during Ramadan. Economy is only helping the military and feudal businesses. The poor are getting poorer and the government people still want bribes.

Another excellent article! However, this proves the point that Pakistan is NOT ready for democracy yet. Pakistan has done better under dictators than fraudulently elected governments. Zardari and his minions have bankrupted Pakistan and have no plans or concerns to help the poor of the country.

Pakistan must raise its level of education to 80% plus and get rid of vadera’s before a fair election can be held and democratically elected government can function for the good of masses.

I have no use for statistics that only measure the depth of depravity. So what if these statistics prove that last 0.0001 % to make the conclusion 100% correct?

Did we really need all these statistics to come to such conclusions?Did we not see the rapacious nature of the father and the daughter and the son-in-law and the Brothers?

Haseeb is not saying it openly - but it will only come up in some other discussion. Democracy is a distant dream. It can not thrive in poverty and ignorance. I have heard that martial law does not work either.

Afghans also have poverty and ignorance since time immemorial. They long for the days of guess who? - the "students". The poor ignorant Afghan knows that as long as there is a warlord - there will be minions of warlords. Inspite of the harsh justice of the "students" (see Time magazine - cover picture of a nose-less woman ) the Afghans want the warlords and the protectors of the warlords out of their country. I have always liked the Afghani naan. It has an unusual shape - but it tastes pretty good with a leg of lamb.

Your reference to education here is right on the money. Democracy only works if the population is educated. At least 80% as you say.The Western push to get Democracy installed in Third World countries ( knowing full well that it will fail) is a ploy to keep them in chaos and from making any kind of progress. This is not a conspiracy theory. You just have to look around at several underdeveloped and developing countries who have been under the thumb of World Bank to see how they have turned out.

As far as I can gauge the reign of Ayub Khan was the best. For may reasons. Firstly, Pakistan made huge amounts of progress in all fields. Secondly, Pakistan had prestige that it never regained since then. Thirdly, if it was not for Ayub, Pakistan would never have become the Military might that it is today. Fourthly, somehow, he managed to keep peace in the country and it was the most peaceful and safest time in Pakistan's history. Remember, Pakistan at that time was both East and West Pakistan. Not an easy task to keep peace in such two disparate lands a thousand miles apart. As and 11 year old I could ride my bike in Dhaka and go anywhere, I mean anywhere, and not feel unsafe.

Here's NY Times reporting military demanding government shakeup in Pakistan:

ISLAMABAD, Pakistan — The Pakistani military, angered by the inept handling of the country’s devastating floods and alarmed by a collapse of the economy, is pushing for a shake-up of the elected government, and in the longer term, even the removal of President Asif Ali Zardari and his top lieutenants.

The military, preoccupied by a war against militants and reluctant to assume direct responsibility for the economic crisis, has made clear it is not eager to take over the government, as it has many times before in Pakistan, military officials and politicians said.

But the government’s performance since the floods, which have left 20 million people homeless and the nation dependent on handouts from skeptical foreign donors, has laid bare the deep underlying tensions between the military and the civilian leadership.

American officials acknowledge that it has also left them increasingly disillusioned with Mr. Zardari, a now deeply unpopular president who was elected two-and-half years ago on a wave of sympathy after the assassination of his wife, Benazir Bhutto.

In a series of meetings with the civilian leaders, the army chief, Gen. Ashfaq Parvez Kayani, scolded the president and his prime minister, Yousaf Raza Gilani, for incompetence and corruption in the government, according to officials familiar with the conversations.

The general also demanded that they dismiss at least some ministers in the oversized 60-member cabinet, many of whom face corruption charges from past cases.

The civilian government has so far resisted those demands, and Mr. Zardari told the general that, come what may, he will not be maneuvered aside, according to a Pakistani official close to the president who was familiar with the conversations but did not want to be identified.

After a meeting between Mr. Zardari, Mr. Gilani and General Kayani on Monday, the president’s office issued a statement saying they had agreed “to protect the democratic process and to resolve all issues in accordance with the constitution.”

“Sanity had prevailed,” the Pakistani official said, meaning that General Kayani chose not to precipitate a crisis.

Still, it is clear that General Kayani, head of the country’s most powerful and respected institution, has ratcheted up the pressure on the government in the past several weeks.

Having secured an exceptional three-year extension in his post from Mr. Zardari in July, General Kayani appears determined to see to it that the government prevents the economy from entering a tailspin, which would further weaken the health of the nation and also the value of the military’s own vast landholdings and other business enterprises.

Military officers in the main cities have been talking openly and expansively about their contempt for the Zardari government and what they term the economic calamity, an unusual candor, reporters and politicians said.

“The gross economic mismanagement by the government is at the heart of it,” said Rifaat Hussain, a professor of international relations at Islamabad University and a confidant of the military. “And there is the rising public disaffection with the Pakistani Peoples Party under Zardari and Gilani.”

As the military demands the overhaul, the Supreme Court is also pushing the government on the issue of corruption by threatening to remove the president’s immunity from prosecution, a move that would expose him to charges of corruption in an old money-laundering case in Switzerland.

As part of their psyche, Pakistanis are still preoccupied with India; however, I choose not to get involved in comparisons.

One of my duties recently was to see how humanitarian aid was being used at the "common man" level during which I came across this blog. The effect of aid will only be temporary maybe a few weeks to two months if that. The magnitude of damage to the already precarious economy is staggering. By conservative estimates it is about US 40 billion or over 20% of Pakistan's nominal GDP. There are many NGOs but their positive effect, although heaven sent, will be minimal!

Moreover, the economic resurgence of earlier years was much more concentrated around the army or businesses allied to the army or owned by the military brass.

The MDG report in your blog is from 2005 survey; nevertheless, the current situation is very alarming. Nature has forced Pakistanis to slip and fall drastically and sadly the ineffective government will add to their problems. Having said that the army isn't any better in my view because the army siphoned a lot of US aid away from social programs.

Sgt. Tom Catsgill: "Moreover, the economic resurgence of earlier years was much more concentrated around the army or businesses allied to the army or owned by the military brass."

Unlike China, there is absolutely no basis for this claim in Pakistan. If it were true, Pakistan wouldn't be the most egalitarian country in South Asia based on the Gini index data.

Civilians in Pakistan have enjoyed significant upward social and economic mobility as reflected in Pakistan having a much bigger middle class growth than India since independence.

Over the last two decades, Pakistan has continued to offer much greater upward economic and social mobility to its citizens than neighboring India. Since 1990, Pakistan's middle class had expanded by 36.5% and India's by only 12.8%, according to an ADB report on Asia's rising middle class released recently.

In fact, the feudal class civilians have dominated Pakistani society and economy much more than any military officers. But the feudal power is now also declining.

Here's an excerpt from a recent New York Times story about declining power of Pakistan's feudal class:

For years, feudal lords reigned supreme, serving as the police, the judge and the political leader. Plantations had jails, and political seats were practically owned by families.

Instead of midwifing democracy, these aristocrats obstructed it, ignoring the needs of rural Pakistanis, half of whom are still landless and desperately poor more than 60 years after Pakistan became a state.

But changes began to erode the aristocrats’ power. Cities sprouted, with jobs in construction and industry. Large-scale farms eclipsed old-fashioned plantations. Vast hereditary lands splintered among generations of sons, and many aristocratic families left the country for cities, living beyond their means off sales of their remaining lands. Mobile labor has also reduced dependence on aristocratic families.

In Punjab, the country’s most populous province, and its most economically advanced, the number of national lawmakers from feudal families shrank to 25 percent in 2008 from 42 percent in 1970, according to a count conducted by Mubashir Hassan, a former finance minister, and The New York Times.

“Feudals are a dying breed,” said S. Akbar Zaidi, a Karachi-based fellow with the Carnegie Foundation. “They have no power outside the walls of their castles.”

Moin: "The Western push to get Democracy installed in Third World countries ( knowing full well that it will fail) is a ploy to keep them in chaos and from making any kind of progress. This is not a conspiracy theory."

Moin: "The Western push to get Democracy installed in Third World countries ( knowing full well that it will fail) is a ploy to keep them in chaos and from making any kind of progress. This is not a conspiracy theory."

But he vowed to galvanise Pakistanis and fight a "jihad against poverty, hunger, illiteracy and backwardness".

Correspondents say there is no real likelihood of him returning soon.

Mr Musharraf also appears to lack the kind of political organisation that could win him an election in Pakistan, they say.'National salvation'

Mr Musharraf unveiled the All Pakistan Muslim League at a gentlemen's club in Whitehall.

There was tight security, with checks on all those entering the room.

Mr Musharraf apologised for some of the actions he took when in power.

"I am aware of the fact that there were some decisions which I took which resulted in negative political repercussions, repercussions which had adverse effects on nation building and national political events, and my popularity also, may I say, plummeted in that last year. I take this opportunity to sincerely apologise to the whole nation."

Mr Musharraf attacked the "total despondency and demoralisation and hopelessness which prevails in society today".

He added: "The time has come to redeem our pledge... to ensure the fruits of freedom are shared by all. The time has come for a new social contract to keep the dream of our forefathers alive... to make Pakistan into a progressive Islamic state for others in the third world to emulate."

Mr Musharraf said he wanted a party of national salvation that would "galvanise all Pakistanis regardless of religion, caste or creed".

Punctuated by chants from supporters, he added: "It is time to unfurl a Muslim league umbrella for all - this umbrella for all shall be the All Pakistan Muslim League."

The former army chief, who now lives in London, earlier told the BBC: "When there is a dysfunctional government and the nation is going down, its economy is going down, there is a clamour, there is a pressure on the military by the people."

He said he was launching the party in London because he risked assassination if he returned to Pakistan. He has survived a number of plots in the past.

Last month, Mr Musharraf told the BBC he would be standing for a seat in the 2013 parliamentary elections. From there he said he hoped to become either prime minister or president.

He made London his base, as a number of Pakistani politicians have done over the years, after his allies lost elections and he was ousted as president in 2008.

If he does go home, he faces legal cases, which he says are politically motivated.

Mr Musharraf seized power in 1999 when, as chief of Pakistan's army, he ousted elected Prime Minister Nawaz Sharif in a coup.

Here's a Business Recorder report on ADB's insistence on IMF prescribed reforms in Pakistan:

ISLAMABAD (updated on: October 02, 2010, 19:37 PST): Pakistan should stick to an IMF reform programme in order to secure enough financial support to rebuild after devastating summer floods and stabilise its economy, the Asian Development Bank (ADB) said.

Heavy financial support was critical for Pakistan long before one of the country's worst natural disasters struck. An International Monetary Fund (IMF) reform package agreed in 2008 had helped keep the economy afloat.

Although pressure on Pakistan eased after the IMF approved a $451 million emergency fund to help it rebuild after the floods, the ADB said delaying reforms would only hurt the country.

"What Pakistan should not have a problem with is continuing with the reform agenda. I am sure actually (this would) underpin a lot of donor support for not only the floods but for the stabilisation of the economy," said Juan Miranda, ADB's director general for its Central and West Asia department.

"We must continue with the reforms. This is our position. That's the way in which you can help people in the longer run.

Pakistan turned to the IMF for an emergency package of $7.6 billion in November 2008 to avert a balance of payments crisis and shore up reserves. The loan was increased to $11.3 billion in July last year, and the central bank received a fifth tranche of $1.13 billion in May.

The emergency fund is not part of the loan programme. Under the loan programme, the government pledged to implement tax and energy sector reforms and show fiscal discipline. However, the country has been missing the IMF targets regularly.

"We still have a programme with the IMF, and that is not something that you stop and then you start again. The economy will benefit by a continuation of the reforms. It's not a question of just money," Miranda said in a telephone interview.

"My biggest worry is that the reform agenda gets derailed. That we lose momentum."

The World Bank and Asian Development Bank are completing a damage assessment for Pakistan, which will give the government and donors an estimate of how much rebuilding will cost.

The floods could knock Pakistan's economic growth this year to as low as 2 percent because of heavy damage to crops, said Miranda, lowering his forecast from 3 percent in late August. Pakistan's official target was 4.5 percent.

Pakistan's central bank said this week economic growth for fiscal 2010/11 could fall to 2.5 percent.

Agriculture is Pakistan's second-largest sector, accounting for over 21 percent of gross domestic product. Nearly 62 percent of the population depends on agriculture for their livelihoods.

Reconstruction could cost tens of billions of dollars. The World Bank said on Thursday it had approved over $400 million in credit to help Pakistan rebuild from massive flooding. It said the funds were part of the Bank's $1 billion commitment to Pakistan in this fiscal year.

The World Bank and the United States have urged Pakistan to take steps to reassure donor countries it is capable of using aid responsibly and that it can enact reforms.

Miranda agreed, saying periodic audits should be conducted and made available to the public through the media.

"It's not just following the rules but showing people that you have followed them. It has to be good, sound, smart oversight," he said.

Mr. Riaz Haq Pakistan recieved the biggest cheer in the cwg opening ceremony after India. This shows how much Indians love Pakistanis and vice versa. Here are some of the pics of the opening ceremony. Hope you like them. Cheers!http://www.skyscrapercity.com/showthread.php?t=1171311&page=56

European textile firms are protesting EU trade concession for Pakistani textile imports to help Pakistan after the massive floods. Here's a Wall Street Journal story on it:

European Union trade concessions for flood-ravaged Pakistan have triggered a backlash among European manufacturers, led by an EU textile sector already imperiled by Chinese imports.

The tensions show how the economic downturn is increasing anxieties over trade to the point where even targeted humanitarian efforts to lower tariff barriers are called into question.

The European Commission, the EU's executive, Wednesday approved tariff waivers on 75 categories of imports from Pakistan for up to three years. The gesture followed an order by EU leaders eager to show they're helping some 10 million Pakistanis left without shelter after violent flooding this summer.

Pakistan isn't a big exporter to the EU, shipping only $4.2 billion worth of goods to the bloc last year. It ranked a distant 46th among EU trading partners, between the United Arab Emirates and Serbia.

However, more than 75% of those exports are textiles, clothing, leather or related products, and those goods will make up a majority of the roughly $140 million in total extra trade the EU says the deal will generate from eliminating the EU tariffs.

That's a problem for European textile manufacturers, mostly located in Europe's southern rim, from Portugal to Italy to Romania. Thousands of small shops and their workers have been getting crushed ever since China joined the World Trade Organization in 2001, partially opening up European textile markets. Some of these European economies are suffering slow growth because of the euro zone's debt problems.

Representing the host nation, Indian athletes performed very well, ending up second on the medals table with 101 medals, including 38 golds, beating England to win the second place with just one more gold medal than England's 37 golds.

As expected, Australia topped the medals table with 177 medals, including 74 golds, down significantly from 221 medals they won in 2006, according to the BBC.

India doubled their medal count to 101 this year from 50 medals in 2006.

England also made gains, winning 142 medals this year, up from 110 in 2006.

Toyota Motor Corp. and Unilever affiliates in Pakistan said the worst floods in the nation’s history may sap growth and force production cuts as consumers struggle to cope with the destruction of crops and houses.

“The economy is fragile,” Parvez Ghias, chief executive officer of Toyota-backed Indus Motor Co., Pakistan’s largest automaker by market value, said by phone yesterday from Karachi. “The prices of food and essentials have gone up significantly.”

“The overall impact of the floods is going to be very serious for the economy,” said Nasim Beg, who helps manage $200 million at Karachi-based Arif Habib Investments Ltd. “In the long term, something like cement might look alright, but in the immediate term, I think everything will be under stress.”

“The damage is going to be significant,” said Muhammad Adil Ghani, plant operations head at Lahore-based Nishat Mills. “We have to reevaluate the forecast for the coming year.”

One of the group’s power plants, in Punjab province, northern Pakistan, was closed for at least five days because of floods, he said. The company’s four textile factories around Karachi, Faisalabad and Lahore haven’t been directly affected.

Nationwide car sales may fall as much as 25 percent this quarter because of the floods, said Indus Motor’s Ghias. The automaker, 38 percent owned by Toyota and an affiliate, may cut output in October because of the expected slowdown, he said. The company has enough orders to maintain its 200 cars-a-day production rate until then, he said.

Pakistan’s major cities and industrial areas, such as Karachi and Faisalabad, have escaped the flooding, which has limited damage at factories and may also curb the impact on earnings. Unilever’s local unit gets about 8 percent of revenue from the worst affected areas, CEO Malik said.

“So far there hasn’t been a major impact on sales,” he said. A reduction in costs may offset any decline in revenue, safeguarding profit, he said.

Mark Mobius, who oversees about $34 billion in developing- nation assets as executive chairman of Templeton Asset Management Ltd.’s emerging markets group, is also buying Pakistani shares in anticipation of a rebound from the floods. Local stocks’ valuations are “very, very attractive,” he said earlier this week.

Unilever Pakistan has maintained production through steps including re-routing shipments of goods, Malik said. Nestle Pakistan Ltd., a unit of the world’s biggest food company, has continued operations at its factories, which are concentrated in Sheikhupura, Kabirwala and Islamabad.

The full impact of the disaster on foodmakers will become clearer over the next week or so as they work through inventories of goods such as fruit pulp, used to make juices, said Syed Fakhar Ahmed, a spokesman for Nestle Pakistan.

Engro Foods’ milk tankers have been unable to reach areas of Sindh and Punjab provinces because of the floods, CEO Rehman said. Retail milk prices may eventually rise by as much as 4 rupees (5 cents) a liter, he said. In the short term, the effect on food prices has been mitigated by Ramadan, a month of fasting for Muslims that began on Aug. 11, he said.

“After the people return and transportation resumes, the supply chain will recover but not completely,” Rehman said.

The country will need to import 1 million head of livestock within five months to replenish stocks, according to the nation’s Meat Merchants Welfare Association. Livestock accounted for 11 percent of gross domestic product in the year ended June 30, according to the government’s economic survey.

“Agriculture is a very significant part of the economy,” Indus Motors’ Ghias said. “If we’re going to see negative growth there, other sectors will be impacted.”

Here are a few excerpts from a New York Times report filed Sabrina Tavernise on Pakistan:

In Mr. Dasti’s area, one of the hardest hit by the recent flooding, the state has all but disappeared. Not that it was ever very present. In the British colonial era, before Pakistan became a separate country, the state would show up a few times a month in the form of a representative from the Raj dispensing justice.

Later, the local landowner took over. For years, feudal lords reigned supreme, serving as the police, the judge and the political leader. Plantations had jails, and political seats were practically owned by families.

Instead of midwifing democracy, these aristocrats obstructed it, ignoring the needs of rural Pakistanis, half of whom are still landless and desperately poor more than 60 years after Pakistan became a state.

But changes began to erode the aristocrats’ power. Cities sprouted, with jobs in construction and industry. Large-scale farms eclipsed old-fashioned plantations. Vast hereditary lands splintered among generations of sons, and many aristocratic families left the country for cities, living beyond their means off sales of their remaining lands. Mobile labor has also reduced dependence on aristocratic families.

In Punjab, the country’s most populous province, and its most economically advanced, the number of national lawmakers from feudal families shrank to 25 percent in 2008 from 42 percent in 1970, according to a count conducted by Mubashir Hassan, a former finance minister, and The New York Times.

“Feudals are a dying breed,” said S. Akbar Zaidi, a Karachi-based fellow with the Carnegie Foundation. “They have no power outside the walls of their castles.”

Mr. Dasti, a young, impulsive man with a troubled past, is much like the new Pakistan he represents. He is one of seven siblings born to illiterate parents. Despite his claims of finishing college, he never earned a degree, something his political opponents used against him in court this spring. One of the 35 criminal cases against him is for murder, a charge he said was leveled by his political opponents. Detractors accuse him of blackmailing rich people in a job at a newspaper. He said he was writing exposés.

“I have more enemies than numbers of hairs in my head,” he said, bouncing down a road in a borrowed truck. “They don’t like my style, and I don’t like theirs.”

One thing is sure ,if Pakistan has an army takeover it is going to push the nation and its economy at least a decade back.Military rule (which most Pakistanis are asking for now)is not a solution especially for such a multi ethnic nation like Pakistan.As a first reaction West will impose severe sanctions against Pakistan and thats not good for its fragile economy.One of the best thing that can happen to Pakistan is that its democratic leaders start delivering.

aamsvad: "As a first reaction West will impose severe sanctions against Pakistan and thats not good for its fragile economy."

The West will do nothing to upset any Pakistani govt, military or civilian, as long the US and NATO need Pakistan's help in Afghanistan.

When Pakistan recently closed just one of the border crossings, all fuel and other crucial supplies came to halt, and the US had to apologize to Pakistan. The other leverage Pakistan has is US reliance on it for drone missions which are flown from bases in Pakistan and rely on Pakistani intelligence.

"The West will do nothing to upset any Pakistani govt, military or civilian, as long the US and NATO need Pakistan's help in Afghanistan."Oh no, you are mistaken Mr Riaz!Currently the Govt's in west are facing severe public anger vis a vis "Why support a nation such as Pak, who hate us like hell".Gov's response to this genuine point is "promote democracy in Pak,blah blah".Once Army takes over Pak, the fig leaf is gone for the western Govts life support to Pak.Then the opposition in these nations will say "No jobs over here and the ruling party sends aid to Pak!"No sane ruling political party will take that risk.

"When Pakistan recently closed just one of the border crossings, all fuel and other crucial supplies came to halt, and the US had to apologize to Pakistan." You think there will be no more Pak army victims as a result of NATO activities?If such unfortunate events happen can Pak close the border once again. Can Pakistan do that for the second time or third time.No answer is no.

"The other leverage Pakistan has is US reliance on it for drone missions which are flown from bases in Pakistan and rely on Pakistani intelligence."I do not concur.Pak-Army personnel/ISI is providing this "intelligence", because its key intelligence personnel,army and some of its business's are being paid very very well.So in a sense they are dependent on US .What is tomorrow US decides no more drones?What if US decides lets explore the routes via "Turkmenistan, Uzbekistan and Tajikistan"? what if US decides Iran should be a friend?What if us decides "forget afghan, Pak is the main issue" and imposes sanctions against Pak?

So this is a double game for both US and Pak.If Pak can do one thing US can do another.Just because Pak was successful once,by closing the border, it cannot succeed again.As it will be pushing US beyond its limits of patience.

aamsvad: "Currently the Govt's in west are facing severe public anger vis a vis "Why support a nation such as Pak, who hate us like hell".Gov's response to this genuine point is "promote democracy in Pak,blah blah"."

People in the West are much more concerned about jobs and economy right now. Foreign policy and democracy abroad are very low on their list of priorities.

Besides, they know talk of democracy by Bush in Afghanistan and Iraq was just an excuse to invade...there are even funny bumper stickers going around saying "Be nice to US or else...we'll bring democracy to your country!"

"People in the West are much more concerned about jobs and economy right now."

Yes that's what it means , when domestic US/West economy is so bad why bail out Pakistan or give costly trade concessions to it? If US wants to spend $2.2 billion why cant that go into Detroit or Louisiana, instead of Pak army? These are the Q which are being asked by the US voters and will be discussed in length by the new senate.If god forbid a major terrorist attack happens in the west, it will be even tougher for Pakistan army to execute such things as an complete takeover.

Dictatorship or military rule , does not work in any multi ethnic nation be it Pak or India.It has been beautifully expounded by Hasyeng Huang of MIT.To paraphrase him "..for a large country like india with multi ethnic and multi cultural population , if you have an dictatorship(army rule) it will not be benevolent....".

He was talking about India but i have no doubt that it hold true for Pakistan.http://www.youtube.com/watch?v=gHFcj_A2kYkTo sum it up.1) Army rule might work in Pak only if it is an benevolent dictatorship.2 ) If Army rule comes, Pak Economy needs to tackle severe western sanctions.

aamsvad: "when domestic US/West economy is so bad why bail out Pakistan or give costly trade concessions to it? If US wants to spend $2.2 billion why cant that go into Detroit or Louisiana, instead of Pak army?"

The US can choose to cut off "aid" to Pakistan but it must also be prepared to lose the use of Pakistani bases and supply routes for its campaign in Afghanistan. Nothing comes free. Neither "aid" nor the use of another country's resources.

aamsvad: "To paraphrase him "..for a large country like india with multi ethnic and multi cultural population , if you have an dictatorship(army rule) it will not be benevolent....".

No country is more diverse than Indonesia with its 17000+ islands, thousands of languages and dialects spoken by thousands of tribes, and yet it was ruled for almost three decades by Gen Suharto who transformed it from an agrarian society into an industrialized nation.

The US has run out of patience and sought other options without success.

I think the US is moving toward the end game by initiating talks with the Taliban leadership, including Mullah Omar and the Haqqani network. And the US knows the success of its strategy depends heavily on Pakistan's support.

Here is the latest news from State Bank of Pakistan reported by The Nation newspaper:

KARACHI – In the backdrop of widespread losses caused by the unprecedented rains and devastating floods to the economy in the early months of current fiscal year, the State Bank of Pakistan has predicted that the real GDP growth would be in the range of 2 to 3 per cent in FY11 against the annual plan target of 4.5 per cent.The SBP, in its Annual Report on the State of the Economy for the year 2009-10 released here on Monday, stated that the annual average inflation for FY11 is likely to remain between 13.5 to 14.5 per cent, up from both, the 9.5 per cent target and earlier SBP forecast of 11.0- 12.0 per cent for the year.Moreover, the provisional SBP projections indicate that the current account deficit will likely to rise between 3-4 per cent while the fiscal deficit is anticipated to be in the vicinity of 5 to 6 per cent of GDP during FY11. In addition, it projected that workers’ remittances are likely to stay between $9.5 billion to $10.5 billion whereas exports and imports are likely to be between $20 billion to $21 billion and $34 billion to $35 billion, respectively in the entire course of ongoing fiscal year.The Report pointed out that financing even the moderate increase in the current account deficit may prove stressful for the economy, with rising pressures on the country’s foreign exchange reserves and exchange rate.The Report said, “Negative shocks stemming from the floods have further exposed the existing structural weaknesses in the economy. Addressing these will require improvements in macroeconomic discipline as well as continued reforms to improve the resilience of the economy. The required reforms include those to improve productivity, strengthen public institutions, improve economic governance, and build social safety nets to protect vulnerable segments of the population.”The Report while referring an independent study, warned that the occurrence of poverty, which started to decline over the last decade, is expected to increase in the wake of the floods in the time to come.According to the Report, the direct impact of the flood-related supply shock is likely to be limited. For example, the impact of flood/rain damages and shortages of minor crops are not expected to persist beyond 2 to 3 months as supply line improves and as fresh crops (e.g., vegetables) enter the market. Similarly, for some other products, any rise in domestic prices would be capped by low international prices.It is important to note here that prices of dairy products were already continuing on a secular rise, even prior to the floods, due to sustained strong domestic and external demand. Livestock losses in the flood would exacerbate this rising trend, but only to a small extent.It said that the extended persistence of double-digit inflation had already been a source of concern even ahead of the floods, particularly given the risk that an upward trend in food-commodity prices (e.g. wheat, edible oil, sugar, corn, etc.) could be compounded by any weakness in the exchange rate. Moreover, inflationary pressures were also expected to strengthen as a result of the recent 50 percent increase in government sector salaries, and anticipated rise in energy tariffs (as the government continued to reduce subsidies) and removal of GST exemptions to broaden the tax base.

After agriculture, textile sector is the second largest employer in India. Here are excerpts from a NY Times report on how the situation is changing in Coimbatore, a big textile center in Tamil Nadu:

The clear losers of India’s currency approach right now are garment makers. From April to August, exports were down 6.4 percent from a year earlier in the $10 billion Indian clothing industry. Although it represents only about 1 percent of the nation’s economy, the garment industry is India’s largest employer after agriculture.

“All the other countries are protecting their currencies, so why are we not?” said Premal Udani, chairman of India’s Apparel Export Promotion Council.

Indian policy makers are eager enough for foreign investment that, for now at least, they are willing to endure the damage a stronger rupee inflicts on exports, especially for lower-value goods like clothes. Exports of other Indian goods and services, like software and pharmaceuticals, have not been as hard hit because they are not as price-sensitive.

India also places a premium on the higher-value jobs that are fueled by foreign investment. Not far from where that old textile mill once stood, the German engineering company Bosch and the American software concern Perot Systems have opened offices in a new technology park.

The influx of capital has helped fuel a nearly 9 percent annual growth rate for India’s economy. It has also powered the Indian stock market to near record highs. A big beneficiary of the stock rally has been the government, which is selling shares in state-owned firms like Coal India, the world’s largest coal miner.

The government, which has a large budget deficit, plans to raise $9 billion in the current fiscal year from share sales and spend the money on jobs for the rural poor and other welfare programs. A stronger rupee also reduces India’s bill for commodities, like oil, that it needs to import.

“If India is to sustain 8 percent growth or 9 percent growth, the only constraint on that can be capital,” said Nikhil Chaturvedi, managing director of Prozone, the Indian real estate firm that is building the Alliance Mall development. “Free flow of capital should be allowed in all sectors” of the economy, he said.

Mr. Chaturvedi, whose joint venture partner in the Alliance Mall is the London-based Capital Shopping Centers, said an appreciating rupee must be tolerated as an unpleasant side effect of the flow of foreign capital.

After agriculture, textile sector is the second largest employer in India, according to fiber2fashion.com :

The Textile Sector in India ranks next to Agriculture. Textile is one of India’s oldest industries and has a formidable presence in the national economy in as much as it contributes to about 14 per cent of manufacturing value-addition, accounts for around one-third of our gross export earnings and provides gainful employment to millions of people. The textile industry occupies a unique place in our country. One of the earliest to come into existence in India, it accounts for 14% of the total Industrial production, contributes to nearly 30% of the total exports and is the second largest employment generator after agriculture.

About 27% of India's foreign exchange earnings are on account of export of textiles and clothing alone. The textiles and clothing sector contributes about 14% to the industrial production and 3% to the gross domestic product of the country. Around 8% of the total excise revenue collection is contributed by the textile industry. So much so, the textile industry accounts for as large as 21% of the total employment generated in the economy. Around 35 million people are directly employed in the textile manufacturing activities. Indirect employment including the manpower engaged in agricultural based raw-material production like cotton and related trade and handling could be stated to be around another 60 million.

Here are excerpts from a NY Times report on how the situation is changing in Coimbatore, a big textile center in Tamil Nadu:

The clear losers of India’s currency approach right now are garment makers. From April to August, exports were down 6.4 percent from a year earlier in the $10 billion Indian clothing industry. Although it represents only about 1 percent of the nation’s economy, the garment industry is India’s largest employer after agriculture.

“All the other countries are protecting their currencies, so why are we not?” said Premal Udani, chairman of India’s Apparel Export Promotion Council.

Indian policy makers are eager enough for foreign investment that, for now at least, they are willing to endure the damage a stronger rupee inflicts on exports, especially for lower-value goods like clothes. Exports of other Indian goods and services, like software and pharmaceuticals, have not been as hard hit because they are not as price-sensitive.

India also places a premium on the higher-value jobs that are fueled by foreign investment. Not far from where that old textile mill once stood, the German engineering company Bosch and the American software concern Perot Systems have opened offices in a new technology park.

The influx of capital has helped fuel a nearly 9 percent annual growth rate for India’s economy. It has also powered the Indian stock market to near record highs. A big beneficiary of the stock rally has been the government, which is selling shares in state-owned firms like Coal India, the world’s largest coal miner.

The government, which has a large budget deficit, plans to raise $9 billion in the current fiscal year from share sales and spend the money on jobs for the rural poor and other welfare programs. A stronger rupee also reduces India’s bill for commodities, like oil, that it needs to import.

“If India is to sustain 8 percent growth or 9 percent growth, the only constraint on that can be capital,” said Nikhil Chaturvedi, managing director of Prozone, the Indian real estate firm that is building the Alliance Mall development. “Free flow of capital should be allowed in all sectors” of the economy, he said.

Here is a quick comparison of different sectors of the economy in India and Pakistan in terms of employment and GDP contribution:

Country....Agri(emp/GDP)..Textiles..Other Mfg..Service(incl IT)

India........60%/16% ...........10%/4%.....7%/25%...........23%/55%

Pakistan......42%/20%...........12%/8%......8%/18%...........38%/54%

Assuming India's PPP GDP of $3.75 trillion (population 1.2 billion) and Pakistan's $450 billion (population 175 million), here is what I calculated in terms of per capita GDP in different sectors of the economy:

India vs. Pakistan:

Agriculture: ($833 vs. $1,225)

Textiles: ($1,242 vs. $1,714)

Non-Textile Mfg ($11,155 vs $5,785)

Services ($7,246 vs $3,654)

It shows that Indians in manufacturing and services sectors add more value and produce higher value goods and services than their Pakistani counterparts.

The income range in India is much wider from $883 to $11, 155 accounting for the much bigger rich-poor gap relative to Pakistan's range from $1225 to $5,785.

Here is an excerpt fom an interesting Op Ed by a Korean commentator Ha-Joon Chang published in the Guadian that exposes the hypocisy of "Washington Consensus" pushed by the West and IFIs like the IMF on developing nations:

An obvious place to look for inspiration is the recent history of the host country. In my lifetime Korea has lived through one of the greatest development miracles – half a century ago, its annual per capita income was around £50, less than half that of Ghana at the time. Today, it stands at £12,000, putting it on a par with Portugal and Slovenia. How was this possible?

Korea of course did things that most people agree are important for economic development, such as investment in infrastructure, health and education. But on top of that, it also practised many policies that are now supposed to be bad for economic development: extensive use of selective industrial policy, combining protectionism with export subsidies; tough regulations on foreign direct investment; active, if not particularly extensive, use of state-owned enterprises; lax protection of patents and other intellectual property rights; heavy regulation of both domestic and international finance.

The G7 was always remarkably reluctant to recommend these "heterodox" policies and insisted that the "Washington consensus" package of opening up, deregulation and privatisation was the right recipe for everyone. When confronted with the Korean case, Washington consensus supporters tried to brush it off as an exception. However, the history of take-offs in most of the G7 countries – especially Britain, the US, Germany, France and Japan – is far closer to the Korean model than is commonly thought. The "unorthodox" policies used by Korea and almost all of today's rich countries need to be seriously considered in any discussion on development options.

Will things change with the launch of the G20 development agenda? An examination of the Korean government's proposals suggests we can only muster cautious optimism. Korea today wants the G20 to focus on a lengthy shopping list of development issues: infrastructure; private investment and job creation; education; greater access to rich country markets by poor countries; more inclusive finance; building resilience to financial or weather shocks; food security; governance. That is a pretty good start. The Koreans reject the "one size fits all" approach of previous decades in favour of what they call a "dynamic iPhone model" – a set of development apps for every occasion, drawn from successful approaches in different countries.

Here's Pakistani economist Dr. Ashfaque H. Khan writing about "Pakistan: a forgotten economy" in a piece published by The News:

How has that economy been transformed into a forgotten one in just three years? Unfortunately, the economy never featured on the radar screen of the present government. Additionally, the government lacked a credible economic team. In less than three years there have been four finance ministers, four finance secretaries and three governors of the State Bank.

The government wasted time and energy in downplaying the achievements of the previous government, while it lurched from one crisis to another, a rudderless ship with no sense of direction and purpose. The current economic team is weak and lacks the capacity to handle the multidimensional challenges it is confronted with, most of which are self-created.

The country’s economic growth has slowed to an average of three per cent per annum, and unemployment and poverty have risen. Higher double-digit inflation has persisted and items of basic necessity have gone beyond the reach of the common man. The debt burden has reached unsustainable levels and the dependence on donors has grown. Clearly, three years of mis-governance and poor economic management have brought the economy to near-standstill. People have lost confidence in the country’s ability to recover from the ever-deepening economic crisis. The recent unprecedented floods have further aggravated the impact of the economic ills.

It is not only the economy which is in decline. This is true of things in every walk of life. To name just a few, this has been evident in the game of cricket, the inaugural parade at the Commonwealth Games, the Haj operations, the creation of the sugar crisis, the running of public-sector enterprises like PIA, Pakistan Railways, the Steel Mills, National Insurance Corporation and TCP, the crisis in higher education, the deterioration in law and order and the debacle of the recently concluded Pakistan Development Forum (PDF).

The PDF meeting requires special mention. The PDF, the reincarnation of the Aid to Pakistan Consortium, is jointly chaired by the World Bank and the Government of Pakistan, represented through its finance minister. The purpose of this forum is to provide a platform to the government where it can present its economic and social reforms agenda before visiting delegations. The PDF has never been a platform for pledging assistance. Unfortunately, this forum was transformed into a pledging forum because every minister, even the prime minister, made statements about the financial loss caused by the floods and asked for financial support. The minister of interior even pleaded for a debt write-off.

It is unfortunate that we have turned every international forum, including Friends of Democratic Pakistan (FODP), into an opportunity for begging. No self-respecting nation begs forever. A beggar cannot command respect in the comity of nation. Continuing to do so, Pakistan risks nothing less than global oblivion. How long can we keep on begging like this? Is this the fate to which the people of Pakistan must resign themselves?

..Molly (Kinder) adds that aid money could make a real difference in how well and how quickly Pakistan is able to recover from the floods. As Molly, Nancy (Birdsall) and Wren have written, redirecting unspent aid money towards flood reconstruction could bolster Pakistan’s economy at a critical moment and lay the foundation for poverty-reducing growth when and if the necessary domestic policy reforms are enacted. We discuss ways to make that aid transparent and to ensure that it isn’t diverted for other purposes.

As Molly and I spoke, top officials from the Pakistani government were in in town for the third set of so-called Strategic Dialogue meetings with their American counterparts. We at the Center got just a taste of those meetings when we hosted Pakistani Finance Minister Abdul Hafeez Shaikh for a private breakfast with members of Washington’s Pakistan policy community and U.S. government representatives. Shaikh’s talk and his savvy about both economic policies and politics impressed all those who attended, but Molly warns that while Pakistan has a full team of skilled economists in the top ranks of government, knowing what needs to be done and managing to overcome the substantial obstacles to reform are two separate issues. Molly adds: the finance minister “rightly identified the challenge, which is how can you create the political momentum within Pakistan to enable these very difficult reforms to happen?”

1. In India and Pakistan, the area under forests and under cultivation increased substantially throughout the post-independence period. The annual growth rates were higher in Pakistan than in India: the forest area increased at an annual growth rate of 1.91% and 0.75% in Pakistan, well above the figures of British India before independence. In India, the growth rates were lower than in Pakistan but comparable to rates recorde before independence.

2. During post-independence period, output (Q) in Pakistan grew at 3.5 percent per annum while Output/Area (Q/A) increased at 2.3 percent. Therefore, the major contribution to agri growth after independence came from increase in land productivity.

3. The level of growth was highest in Pakistan, followed by India, with Bangladesh at the bottom.

4. In all three countries, the growth rate of land productivity was not high enough to cancel the negative growth of land availability per capita. But the output per capita growth in Pakistan continues to be higher than in India and Bangladesh.

Here is some anecdotal evidence as well as research and data that show that agriculture sector in Pakistan has done better than in India and Bangladesh, particularly since independence in 1947.

First, India has had lower productivity and higher poverty in its rural areas than Pakistan, as can be seen in terms of hundreds of thousands of farmers' suicides in the last decade. Over 17000 Indian farmers killed themselves in 2009 alone, according to Indian govt data. Over 75% of Indians live on less than $2 a day versus 60% of Pakistanis.

A recent satirical Indian film "Peepli Live" has amply shown how the Indian politicians and bureaucracy have bugled the situation of farmers.

Data shows that the majority of Indians who work in agriculture and textiles are on average 50% poorer than their Pakistani counterparts, as also reflected in the under-$2 a day per capita income figures for 60% of Pakistanis and 76% of Indians.

Third, here are some interesting highlights from a paper "Land-use Changes and Agricultural Growth in India, Pakistan, and Bangladesh, 1901-2004" by Takashi Kurosaki:

1. In India and Pakistan, the area under forests and under cultivation increased substantially throughout the post-independence period. The annual growth rates were higher in Pakistan than in India: the forest area increased at an annual growth rate of 1.91% and 0.75% in Pakistan, well above the figures of British India before independence. In India, the growth rates were lower than in Pakistan but comparable to rates recorde before independence.

2. During post-independence period, output (Q) in Pakistan grew at 3.5 percent per annum while Output/Area (Q/A) increased at 2.3 percent. Therefore, the major contribution to agri growth after independence came from increase in land productivity.

3. The level of growth was highest in Pakistan, followed by India, with Bangladesh at the bottom.

4. In all three countries, the growth rate of land productivity was not high enough to cancel the negative growth of land availability per capita. But the output per capita growth in Pakistan continues to be higher than in India and Bangladesh.

There seems to be consensus developing among Pakistani economists that "prompt measures needed to control rising inflation", according to a report in Daily Times:

LAHORE: Pakistan is fast heading towards higher inflation and to overcome this grim scenario; improvement in governance coupled with a drastic cut in expenditure and revenue generation is crucial.

The doom and gloom scenario needs an urgent handling. Good governance, good policies, good institutions, good macroeconomic management are the drivers of economic growth that have gone dormant for quite some time. This was the crux of the speeches delivered at Economic Dialogue 2011 held at Lahore Chamber of Commerce and Industry on Tuesday. Senior economist Dr Akmal Hussain said the country is facing its gravest economic crisis in history after 1971. He said the economy is in deep recession, poverty along with high inflation is a recipe for disaster.

Unfortunately, he added, the government has zero fiscal space. He warned that Pakistan was heading towards higher inflation if immediate improvement in governance is not accompanied with cut in expenditure and substantial increase in revenue.

The former WB Executive Abid Hassan said that the institutional decay has now started taking its toll and the government should take appropriate measures on emergent basis to stop this decay. He said that with every passing day the country is going deeper and deeper into the economic mire. “Today we have reached a situation where even an economic stimulus would not work. The government should concentrate on tax collection and controlling unnecessary expenditures. Unless and until these two measures are not taken, the economy would not be able to be back on rails,” he said. The PIDE Vice Chancellor Dr Rashid Amjad said that the present day doom and gloom scenario could be changed by overcoming the acute energy shortage being witnessed by the country. The issue of circular debt needs to be taken care of by those sitting at the helm of affairs. “PSDP has a multiplier effect on the employment and economy. It should not be cut,” he said.

Former chief Economist Planning Commission Dr Pervaiz Tahir blamed the political chaos for our economic woes and termed the dictatorship democracy cycle as mother of all ills.

Energy sector expert Munawar Baseer, ex Executive committee member Almas Hyder and LCCI President Shahzad Ali Malik while appreciating the input provided by the economists said that most of the issues and challenges faced by the country are more of political. The political leadership while realizing the sensitivity of the situation should come up with a solid solution with close coordination with the chambers. “The policies are being made in isolation without the consultation of real stakeholders and that’s why the economic situation today has become more complex and directionless,” he said. The speakers said that the business community should be involved for the sake of correct decision-making.

They urged the government to evolve a more realistic and pragmatic framework by putting an end to inter-provincial disparity and the disparities within the province. The government should re-do its priority list and concentrate on the few areas that come on the top of that priority list.

It is very unfortunate, the speakers said, that the country has become the most inhospitable for both the local and the foreign investors for security reasons.

“Our inability to reach a consensus on water issue and inability to tap hydrocarbon potential of Balochistan has virtually pushed us to the wall,” they said. staff report

Pakistan is not alone in being targeted by the doomsayers, many othrers, including India's cheerleader Fareed Zakaria, have also been betting against the United States for decades. Here's an excerpt from a Time Magazine Op Ed by David Von Drehle:

Poor U.S. of A., forever in decline. the arrival of public theaters in Boston circa 1790 caused Samuel Adams to despair for the cause of liberty in the face of such debauchery. "Alas!" he wrote. "Will men never be free!" Charles Lindbergh fretted, "It seems improbable that we could win a war in Europe." Long before baseball, hand-wringing was the national pastime. We've never been virtuous enough, civilized enough, smart enough or resolute enough.

I was born into a country reeling from Sputnik, which revealed to the whole world that Americans are as dumb as rocks. John F. Kennedy had just been elected President, in part by bemoaning the "missile gap" between the mighty Soviet arsenal and our paltry few bottle rockets. "The United States no longer carries the same image of a vital society on the move with its brightest days ahead," Kennedy said in his final debate with Richard M. Nixon. That's the same Nixon who declared eight years later, "We are worse off in every area of the world tonight than we were when President Eisenhower left office." Hard to believe we could sink further, but we did, as the nightmare of Vietnam segued into the nightmare of Watergate, while the Japanese exposed the insufficiency of American enterprise. As I stumbled off to college, President Jimmy Carter was warning us about "a crisis of confidence ... that strikes at the very heart and soul and spirit of our national will." Thanks to our horrible schools, we were — according to the title of a major 1983 report — "A Nation at Risk." Then our family values went down the toilet.

You'd think America would be as washed up by now as the Captain and Tennille. So how come we're so much stronger than we were 50 years ago? Somehow, in the 235 years since we got started, Americans have weathered Boston theaters and Soviet science prodigies, violent lyrics and sex out of wedlock. We've survived a Civil War, two world wars and a Great Depression, not to mention immigrant hordes, alcohol, Freemasons and the "vast wasteland" of network television. We've dodged the population bomb, the coming ice age, acid rain and the domino effect. America is to nations what Roberto Clemente was to right fielders. The Pirates legend fretted endlessly about how poorly he felt and how sick he was — while vigorously spraying hits and vacuuming fly balls.

So don't reach for the defibrillator paddles or the rosary beads quite yet.

Here are some excerpts from an Op Ed in Newsweek Pakistan by Meekal Ahmed, a former IMF official:

The government hopes to generate Rs. 53 billion during the last quarter of the current financial year, which concludes on June 30. It hopes to achieve this by imposing a 15 percent surcharge on income tax paid by Pakistan’s paltry 1.7 million registered, individual taxpayers. Given the small tax base and modest yield, the surcharge seems unfair and not worth it. In a move that is regressive and potentially inflationary, depending on the market, excise duty on certain import items has been increased from 1 percent to 2.5 percent until end-June. While these measures are better than doing nothing at all—which is what happened during the first three quarters—they are far from ideal, and don’t go far enough to address the big problems with the economy.

But it’s not all bad. The elimination of tax exemptions for agricultural inputs (including tractors, fertilizers, and pesticides) was long overdue. With a strong agro-lobby preventing taxation on their handsome incomes in a sector that contributes 21 percent of GDP, the government might as well tax the inputs. Tax exemptions for export quality textiles sold within Pakistan have also been nixed despite resistance from the fierce textile lobby. The freeze on additional hiring in the public sector, and the 50 percent cut in several spending categories should also be welcomed.

Then there is the profusion of what many Pakistani media outlets call “petrol bombs”—highly unpopular oil price adjustments at the start of each month. The government announces the adjustments, and then rolls them back under popular and political pressure. The fuel price adjustments are unavoidable. Pakistan is a net oil importer and can’t insulate itself from global price shocks. Oil prices have risen steeply in the last three months, and have now crossed the psychologically important 100-dollar mark. Pakistan’s fuel subsidies—at an estimated Rs. 5 billion per month that could have been spent on development—are unaffordable and unsustainable. Oil prices will remain high for a while. Pakistanis must adjust to this reality. ........Despite the new measures, doubts remain about the revised tax-revenue targets and the state’s capacity to achieve them. The Federal Board of Revenue is notorious for its chronic underperformance. The justification that there is a tax revenue shortfall because the economy is in recession holds no water. An economy expected to grow at around 3 percent is not, technically speaking, in recession, but is growing below its potential. There is no cycle for fiscal revenues in Pakistan: whether the economy grows at 3 percent or 7 percent, whether inflation is 2 percent or 25 percent, tax revenues fail to keep up. If they did not, there would be a constant tax-to-GDP ratio, which is actually falling. This trend points to the existence of deep-rooted structural deficiencies in the tax system, which is regressive, anti-poor and plagued by too many exemptions and concessions. Then there’s also corruption, abuse of the system, and evasion. Even taxes withheld at source are not deposited in the government’s account because of alleged connivance between withholding agents and tax officials.

In the past decade Pakistan has emerged as a country of immense importance. Large, heavily populated, strategically placed between Iran, Afghanistan and India, Pakistan has since its creation just over sixty years ago been pulled in several different, irreconcilable directions.

In the wake of Pakistan's development of nuclear weapons, Osama Bin Laden's presence in its unpoliceable border areas, its shelter of the Afghan Taleban, and the spread of terrorist attacks by groups based in Pakistan to London, Bombay and New York, there is a clear need to understand this remarkable and highly contradictory place.

Far from seeing Pakistan as the failed state often portrayed in the media, Lieven's extraordinary new book instead treats it as a viable and coherent state that, within limits and by the standards of its own region rather than the West, does work. Lieven argues strongly against US actions that would risk destroying that state in the illusory search for victory in Afghanistan.

This work is based on a profound and sophisticated analysis of Pakistan's history and its social, religious and political structures. Lieven has interviewed hundreds of Pakistanis at every level of society, from leading politicians and soldiers to village mullahs and rickshaw drivers. In particular, his examination of the roots of popular sympathy for the Taleban in Pakistan draws on the testimony of people whose views are rarely consulted by Western analysts.

1. For most of the years since 1947, Pakistan has had higher economic growth rates than did India. Pakistan does not have the same pockets of extreme poverty, or for that matter the extreme wealth. The level of economic equality in Pakistan is relatively high.

2. Charitable donations run almost five percent of gdp, one of the highest percentages in the world and this reflects the emphasis on alms-giving in Islam.

3. A good quotation from a businessmen: “One of the main problems for Pakistan is that our democrats have tried to be dictators and our dictators have tried to be democrats.”

4. Agriculture pays virtually no tax and the government lends lots of money to businesses and doesn’t seriously ask for it back. As a result Pakistan collects far less revenue than does India, even comparing areas of comparable per capita income. If Pakistan were a state of India, it still would be considerably richer per capita than India’s poorest regions, such as Bihar.

5. The Pakistani state is nonetheless a lot more stable than most people think. In part this is because of the conservative structure of kinship and landholder power in the country.

6. The main threats to the future of Pakistan have to do with ecology and water, not politics.

7. The end of the book has a very interesting discussion about how U.S. actions in Pakistan affect different coalitions, feelings of humiliation, relative status relationships, etc.

Definitely recommended, as are Lieven’s books on the Baltics and Ukraine.

Yet another debacle has occurred on the economic front, with the government failing to float its exchangeable bond in the international debt-capital market. In an act of desperation, the Pakistani economic manager had decided to launch a $500-million exchangeable bond with 10 percent shares of Oil and Gas Development Corporation (OGDC) attached to this transaction, the proceeds of which were to come by the end of the current fiscal year. It was the intention of the government to use these proceeds for retiring its State Bank debt and reducing its budget deficit to that extent.

The Pakistani team was informed by the global investors during the road show that they had little appetite for Pakistani paper at the moment, particularly in the presence of the Greek debt crisis and the unresolved issue of increase in the debt limit of the US administration. The Pakistani team did not pitch for the bond and returned empty-handed.

Why did Pakistan have to abandon its transaction? Are the economic managers aware of the consequences of such a colossal failure for the country? One thing is clear from the perspective of the economic managers: who cares about the country? They are there to improve their resumes.

What is an exchangeable bond? The country issues a normal sovereign bond with an option that the bondholder can convert the bond into common shares. The transaction under discussion provided an option to bondholders to convert their bonds into OGDC shares. The advantageous thing about such a bond is that it has the option for conversion of debt into portfolio investment.

There are many reasons for the failure of this transaction. Firstly, the timing for floating the bond was highly inappropriate. This is summertime, when investors close their books and go for vacations. Secondly, the international economic environment, particularly the persistence of the Greek debt crisis and the emergence of issue pertaining to enhancing the debt limit of the US administration have created severe uncertainty in the international debt-capital market.

Thirdly, Pakistan’s own economic fundamentals are weak. Why would anyone invest in a country’s paper whose debt is rising, budget deficit is averaging over six percent of the GDP, high double-digit inflation continuous persists for the last 45 months, and growth is slowing to an average of 2.6 percent per annum over the last four years. Fourthly, Pakistan’s relations with the IMF and other development financial institutions (DFIs) are not smooth. Fifthly, Pakistan’s relations with the United States are also on a bumpy ride. For an emerging market country, its relationships with the US, the IMF and the DFIs are critical in attracting global investors to invest in its paper.

Sixthly, Pakistan’s domestic political and security environment are not conducive to attract global investors to invest in Pakistani paper. Seventhly, the Pakistani team involved in this transaction, barring one member, was quite immature and had no idea whatsoever about the transaction. All these factors have contributed to the failure of the transaction, damaging the reputation of the country and OGDC. In order to save face, the economic team could call this transaction “non-deal road show.” But the international capital market participants are not novices. Word has already travelled across the globe that Pakistan has failed to find takers for its paper.----It is in this perspective that Pakistan floated its paper from February 2004 to May 2007. Each time the Pakistani paper was oversubscribed substantially. Pakistan emerged as one of the few countries which successfully floated a 30-year bond. This simply reflected the confidence of global investors in Pakistan’s economic management....

Two (Pakistan) government teams, which went to London, Singapore and Bangkok for holding road shows, have come back. They did not pitch the bonds at investors, instead restricted the presentations to the state of Pakistan’s economy, said one of the officials who travelled abroad for the road shows.

Another official, who also took part in the road shows, said foreign investors told the visiting teams that capital markets were nervous at this time because of a couple of international developments. They proposed that Pakistan should wait until the Greece debt crisis and issue of increase in debt limit for the Obama administration are resolved.

“In an effort to keep the budget deficit at manageable levels, the government wants to float $500 million worth of bonds before June-end,” said a spokesman for the finance ministry. Economists and a parliamentary panel have advised against the transaction, arguing that long-term assets cannot be consumed to settle short-term liabilities.

Sources in the Privatisation Commission told The Express Tribune that the government suddenly decided to convert the road shows into a ‘no-deal’ event, where it would not disclose the size of the bonds and the indicative interest rate it wants to pay.

Despite questions put up by international investors, the teams did not disclose details of the bonds. A Privatisation Commission official said the investors were keen to know the coupon price but the officials remained tight-lipped.

The Cabinet Committee on Privatisation has approved the term-sheet of the exchangeable bonds with an indicative mark-up ceiling ranging between 6.5 and 8.5 per cent.

Sources said international investors expressed interest in the bonds, as they were keen to invest in the energy company. However, some of them raised questions about Pakistan’s relationship with the International Monetary Fund (IMF). The Fund has suspended the $11.3 billion bailout programme since May 2010 after the government failed to meet some conditions.

IMF and European Union approved a 110-billion-euro bailout package for Greece last year but have withheld payment of a tranche of 12 billion euros that will help Athens pay its debts coming due by September. The international lenders have asked Greece to first place deep cuts on spending, prompting riots across the country. The Greek parliament on Tuesday voted for reforms but still IMF has not disbursed the tranche.

On the other hand, the United States too is coping with a crisis to avoid defaults on payments as the Obama administration reached its borrowing limit of $14.3 trillion on May 16. The administration sought an increase in the debt limit to avoid default that was overwhelmingly rejected by the House on May 31, reported the ....

KARACHI - Shahid Kardar's resignation as governor of the State Bank of Pakistan this week after less than a year in the job sends out another deeply negative signal on the country's economic management and further erodes belief in Islamabad's commitment to fiscal reforms demanded by the International Monetary Fund (IMF).

Finance Minister Abdul Hafeez Shaikh is making last-ditch efforts to persuade Kardar to withdraw his resignation, which he submitted mid-week before leaving Islamabad for Lahore. Kardar returned to the capital on Thursday at Shaikh's request to iron out their differences, Dawn reported on Friday, citing an unnamed source.

Kardar was appointed central bank governor last September and is the second in succession to leave the post before completion of the three-year statutory term. His predecessor, Salim Raza, quit for personal reasons in June 2010, although commentators at the time said his resignation was a response to efforts to curtail the central bank's independence. Kardar will remain central bank governor until his resignation is officially accepted, the Wall Street Journal reported.

Critics say the two resignations in quick succession, and Shaukat Tarin's resignation as finance minister in February last year, reflect a failure by the government to take management of the economy seriously. The Pakistan People's Party (PPP)-led government has gone through four finance ministers, five finance secretaries, four deputy chairmen of the Planning Commission and now possibly three central bank governors since it came to power in September 2008.

Concern that Kardar's departure will add to confusion among international organizations such as the IMF as to who has authority to deal with issues that include increasing tax revenues and cutting the government's heavy dependence on loans was downplayed by Sakib Sherani, a former economic adviser to the Finance Ministry.

"The IMF deals with institutions and not individuals so it's likely the acting governor will attend IMF meetings," he said, according to a Reuters report. "What's critical for the markets is who his successor is and why he resigned."

Such pre-term departures from the central bank "serve as a jolt to the banking and finance industry in the country, as the entire industry adopts a 'wait-and-see' strategy", The News reported economist Ashfaque Hassan Khanas as saying.

Kardar resigned amid reports suggesting he had developed serious differences with top state functionaries, according to The Express Tribune. Kardar is reputed to have given the government a hard time at cabinet and economic coordination committee meetings.

Even so, his critics claim he has been unable to exert the central bank's independence. His inability to have a bank amendment act passed in its original shape meant the government approved a "toothless" act, maintaining the Finance Ministry's hold over the central bank.

Pakistani officials, including the central bank governor, are due to meet with an IMF team later this month. Kardar has been supporting fiscal reforms demanded by the IMF, urging a broadening of the tax base and gradual elimination of untargeted subsidies.

He recently called for better debt management by the government to contain the fiscal deficit. The IMF since August 2010 has suspended a US$11.3 billion loan program, initially agreed late in 2008, as Islamabad drags its feet on introducing tax reforms, raising power tariffs and cutting subsidies.

KARACHI: Oil and gas sector in Pakistan has seen phenomenal growth since the independence in 1947, as till now 791 wells have been drilled by various local and international exploration companies with over 250 oil and gas discoveries, official data revealed.

The data suggests that these discoveries have brought the gas reserves to 29 trillion cubic feet (TCF), whereas the crude oil recoverable reserves are estimated at 304 million barrels.

At the time of independence, the oil quantities produced were scarce and at that time there was no gas production. Over these years the petroleum industry has played a significant role in the national development by making large indigenous gas discoveries and inviting huge investments, both local and foreign, in the sector.

An investment of $810 million was spent in drilling activities with 30 new wells drilled during the last year.

After the independence of Pakistan, the government promulgated Regulation of Mines and Oilfields and Mineral Development (Government Control) Act, 1948 and issued rules there under in 1949.

The aim of the act was to provide regulatory certainty for exploration and production business that was essential to encourage and accelerate petroleum exploration activities.

In 1952, a well drilled on the Sui structure in Central Indus Basin, made the maiden discovery of large reserves of natural gas in the Sui Main Limestone of Early Eocene age.

The original recoverable gas reserves were estimated to be over 10 trillion cubic feet (TCF) equivalent to about one billion barrels of oil.

The discovery of Sui Gas Field was the first major milestone in the search for hydrocarbons in Pakistan.

Following the natural gas discovery at Sui, several foreign oil companies took active interest in carrying out exploration in Pakistan. This led to further exploratory drilling in prospective areas.

The government of Pakistan then decided to undertake the search for oil and gas directly and established the state oil exploration company.

The Oil and Gas Development Corporation was established in September 1961, subsequently, incorporated as a joint stock company with the listing at the local stock exchanges under the name of the Oil and Gas Development Company Limited (OGDCL).

OGDCL’s first success was the small gas discovery at Sari Singh in Sindh in 1965.

Pakistan remains an active and prospective exploration country. Significant finds continue to be made in the existing producing areas, as well as in less-explored regions.

In order to remain attractive in highly competitive global exploration market, the government has been making progressive changes in the investment polices and regulations at regular intervals. With first E&P policy of 1991, Pakistan caught the attention of international petroleum industry.

Further subsequent improvements through policies of 1993, 1994, 1997 made Pakistan an attractive location for upstream investment.

Pakistan overhauled the policy in 2001 and then in 2009. On account of combination of factors such as improved returns on investment based on new fiscal incentives, transparent and open regulatory environment, induction of market reforms and technological advances, the government expects positive influence on local upstream market and hopes that forward momentum will be maintained.

The period from 1958 to 1969 during which President Ayub ruled and Mr.Shoaib served as Finance Minister for most of these years is considered as thegolden era of Pakistan’s economic history. The period had strong macroeconomic management and the economic indicators were extremely impressive.Agriculture grew at a respectable 4 percent while remarkable rates wereachieved in manufacturing (9 percent) and trade (7 percent) GNP growth ratesexceeded 6 percent on average throughout the period. Economic growth wasvery strong on all fronts.Structural changes that took place under the stewardship of Mr. Shoaiblaid the foundation for Pakistan’s subsequent economic performance.Manufacturing sector which was quite nascent increased to nearly 15 percent ofDGP. Pakistan’s economic model was considered a benchmark for thedeveloping countries. By the end of the decade, Pakistan’s manufacturedexports wee higher than the combined manufactured exports of the Philippines,Thailand, Malaysia and Indonesia. It is purely a matter of conjecture as to wherePakistan would have stood today in terms of per capita incomes if it hadcontinued the economic policies of 1960s.A country’s economic outcomes depend upon a host of factors (a) Initialresource endowment; (b) External environment; (c) Strategy and policyframework; (d) Administration capacity; (e) Political stability.Pakistan inherited a weak resource endowment as the part thatconstituted India was relatively advanced in terms of natural, human and physicalresources while the two wings of Pakistan separated by 1,000 miles of Indianterritory were quite backward.Delivered as the 19th Shoaib Memorial External environment facing Pakistan in the decade of the 1960s wasmixed. The war of 1965, however, caused immense economic damage toPakistan and foreign aid flows did suffer in the post 1965 period.The strength of the economic performance in this decade can mainly beexplained by the strategy and economic policies pursued during this period, theefficiency with which these policies were executed due to improvement inadministrative capacity and the political continuity and stability that prevailed untillate 1968.------------Economic policies pursued by Ayub-Shoaib administration in the 1960swere outward-oriented, liberal and supportive of the private sector. State playeda facilitating and enabling role by providing incentives, supplying infrastructure(particularly in irrigated agriculture), institutions and technology. Macroeconomicmanagement was sound and prudent and fiscal and external balances weremanaged well. Inflation remained in check and the annual rate of growth inprices was only 3.3 percent. However, rapid economic growth andindustrialization resulted in income inequalties and regional disparities that hadserious political repercussions subsequently. Social sectors were neglected andindustries for capital goods were not set up. Import substitution strategy had apositive pay off but also nurtured rent-seeking and pressures for protectionagainst external competition thus masking the inefficiencies of domesticindustries. Exchange rate policies created distortions and arbitrageopportunities. But the positive contribution that made Pakistan self-sufficient inwheat and rice was the adoption and diffusion of Green Revolution technologiesthat also helped uplift the living standards of the rural population.

Here's an except from a piece written by Mudassar Mazhar Malik, an MIT (Sloan) and LSE (London) educated Pakistani economist and investment banker, for Maleeha Lodhi's compendium "Pakistan Beyond The Crisis State" on his assessment of Pakistan today:

"First, despite seven changes in government in the past twenty years, Pakistan has maintained an average growth rate of 5 percent per annum. Until recently, Pakistan was being touted as one of the most dramatic turn-around stories of the last decade. Driven by domestic demand and population growth, GDP growth averaged over 6% a year from 2003-2008. This translated into an investment and infrastructure led growth cycle cycle fueling expansion in the housing, health care, education, food, infrastructure, energy, telecommunications, IT and financial services sector. This has meant that Pakistan's economy has moved progressively from its traditional agricultural base to manufacturing and increasingly to services. In that sense, Pakistan's economic structure is closer to that of India and China, and is unlike many smaller Asian countries, which are more dependent on export growth."

According the Human Development Report 2010, Pakistan’s HDI value increased from 0.311 to 0.490 during 1980 to 2010, an increase of 58% or average annual increase of about 1.5% which ranked it 10 in terms of HDI improvement in comparison to the average progress of other countries. Pakistan’s life expectancy at birth increased by more than 9 years, mean years of schooling increased by about 3 years and expected years of schooling increased by almost 4 years. Pakistan’s GNI per capita increased by 92 per cent during the same period.Pakistan’s 2010 HDI of 0.490 is below the average of 0.516 for countries in South Asia. It is also below the average of 0.592 for medium human development countries. From South Asia, Pakistan’s 2010 “HDI neighbours”, i.e. countries which are close in HDI rank and population size, are India and Bangladesh, which had HDIs ranked 119 and 129 respectively. Pakistan is also compared to the Islamic Republic of Iran, a high human development country.

From Clay Seals to Cashless Economy, the money exhibit at the State Bank of Pakistan Museum in Karachi as reported by The Express Tribune:

And this history of monetisation— recounted through a treasure trove of cowrie shells, coins, stamps and notes — is showcased in the State Bank of Pakistan (SBP) Museum & Art Gallery. This pink sandstone structure with looming window shutters and jumbo doors was inaugurated on July 1, and previously housed the Bank of India before partition and the SBP’s library. Inside the mammoth colonial structure, with a refurnished interior boasting spangling spotlights and a renovated brass and glass skylight, are neatly organised sections displaying the history of money over the millennia.

Chronology of money

Perhaps the most interesting section of this museum is the coinage section, neatly divided into pre-Islamic and Islamic periods. The pre-Islamic display starts with the punchmarked coins used by Greeks and Aryan invaders dating back to the 6th and 7th century BC. The currency of this epoch is conspicuous for the Hellenistic trait of bearing the imprint of the ruling monarch’s portrait.

The chronological exhibit gives way to the second section showcasing coinage from the ‘Islamic period of India and Pakistan’ – a misleading description since Pakistan did not exist till 1947 and non-Muslim influences remained strong in the entire sub-continent even after invasions by Muslim rulers. On display are the copper, gold and silver currencies of the all-too familiar Muslim conquerors of history books — the Ghaznavids, the Ghauris and the Mughals etc. The changing shape, symbols and language on the coins attest to the sub-continent’s turbulent political past. Interestingly, when new invaders successfully captured an area, they used the coins of the old conquerors before introducing their own, but overstriked their own names and symbols on them.

As fascinating as this linear trajectory of money is, it does not add anything radically new to the viewer’s knowledge. In fact the exhibited currency, which matches the timeline of most textbooks in Pakistan, highlights that the complex history of the sub-continent is always confined to simple timelines and neat linear paths.

Artifacts and art work

Apart from the sequential record of currency, the SBP museum houses fascinating historical artifacts and art work. There’s the country’s first ATM machine on display; first employed by Habib Bank in 1988, it closely resembles a photocopying machine. There’s also coin-minting apparatus — a cumbersome green object with a wheel-like posterior — and a 100-year-old gold-weighing scale, refurbished with golden paint.

The second storey of the museum’s building houses a small art gallery showcasing the works of the renowned rebel artist, Sadequain, and a few other contemporary artists such as Marium Khan and Amir Hasan Rizvi. Sadequain’s murals, originally made for the SBP, are majestic illustrations depicting distorted life-sized figures, whose coarse texture comes from the fine lines etched into the paint by a blade.

The museum, displaying lengthy historical descriptions and staffed with trained tour guides, is the first of its kind in Pakistan and is now open for public viewing.

Pakistan is one of the few developing countries that has achieved an average annualgrowth rate of over 5 percent over the six decades. Consequently, the incidence of poverty hasdeclined from 40 percent to 24 percent. The salient features of Pakistan’s economic history aresummarized below:• A country with 30 million people in 1947 that couldn’t feed itself and had to import all itsfood requirements is not only able to fulfill the domestic needs of 170 million people at amuch higher per capita consumption level, but also exports wheat and rice .• An average Pakistani earned about $ 1050 in 2009 compared to less than $ 100 in 1947.In US current dollar terms the per capita income has expanded almost ten fold.• Agriculture production has risen five times with cotton attaining a level of more than 12million bales compared to 1 million bales in 1947. Pakistan has emerged as one of theleading world exporter of textiles.• Manufacturing production index is well over 13,000 with the base of 100 in 1947. Steel,cement, automobiles, sugar, fertilizer, cloth and vegetable ghee, industrial chemicals,refined petroleum and a variety of other products are manufactured for the domesticmarket and in many cases for the world market too.• Per capita electricity generation has reached 10,160 kwh compared to 100 in 1947.Pakistan’s vast irrigation network of large storage reservoirs and dams, barrages, linkcanals constructed during the last five decades has enabled the country to double the areaunder cultivation to 22 million hectares. Tubewell irrigation provides almost one third ofadditional water to supplement canal irrigation.• The road and highway network in Pakistan spans 250,000 km-more than five times thelength inherited in 1947. Modern motorways and super highways and four lane nationalhighways link the entire country along with secondary and tertiary roads.• Natural gas was discovered in the country in the 1950s and 32 billion cubic feet ofnatural gas is generated, transmitted and distributed for industrial, commercial anddomestic consumption accounting for 50 percent of the country’s energy needs.• Private consumption standards have kept pace with the rise in income. There are 52 roadvehicles for 1000 persons relative to only one vehicle for the same number of populationin 1947. Phone connections have reached 100 million from almost scratch. TV sets whichwere non-existent adorn 62 out of every 1,000 houses.

Pakistan faces a “challenging” economic outlook and should seek to contain its deficit while adopting a cautious monetary policy, the International Monetary Fund said after an annual review of the country’s policies.

Economic growth is expected to reach about 3.5 percent for the fiscal year started July 1 and inflation is forecast to slow down, the Washington-based IMF said in a press release today.

A vigorous difference of opinion among technocrats, economists and corporate leaders on a number of socio-economic issues was witnessed during an interactive session held at the Institute of Business Administration (IBA) on Saturday. And at the end it was unclear whether democracy was the answer, or a dictatorship, as advocates for both arguments came up with pretty convincing logic.

Speaking at the session organised by IBA in collaboration with Blinck, a youth resource group, under the title of “New Year Resolutions for the Economy of Pakistan,” panellists candidly expressed disagreements over the questions of foreign aid, democracy and the interplay of policy-making and implementation at the national level.

“Many people think that a non-democratic set-up is a panacea for the economic problems of Pakistan. They’re wrong. A non-democratic government is not sustainable,” said Ishrat Husain, former governor of the State Bank of Pakistan, who is currently serving as dean and director of IBA. “Democracy is slow and messy. It takes two steps forward and four steps backwards. Yet it’s the only option. The democratic process shouldn’t be interrupted.”

Husain said military regimes do make an extra effort in the beginning to improve the economy because they have not yet developed a constituency of their own. “But later on, they start making compromises.”

Claiming that a democracy needs low poverty and high literacy rates to prosper, Gillette Pakistan CEO Saad Amanullah Khan said Pakistan had only two eras of development: first, in the early 1960s, and second, during the first three years of the Musharraf government. “I don’t care if a dictator is there as long as he revamps the economy,” Khan said.

He said that the idea of a government led by technocrats that could bring the economy back on its feet had its relative merits. Khan emphasised the need for adopting a national vision for long-term growth, adding that the entire nation should work towards its realisation. “Go to Proctor & Gamble or Gillette, and they’ll tell you their five-year goals in detail. But ask a government representative what the vision for Pakistan is for the next five years, you won’t get any definite answer.”

Disagreeing with Khan, Husain said Pakistan did not need any more “visions,” as the problem existed in their implementation only. “The country is full of pious documents. These are beautifully written policy papers that nobody reads. We all agree on the substance of policy, but the implementation is the real issue.”

Responding to a question, former Asia editor for The Economist Simon Long said it was wrong to attribute Pakistan’s dismal economic performance of six decades to its culture or laid-back attitude to work. He said that 35 years ago people often assumed China’s poor economy was a consequence of Confucianism. He said it was now obvious that Confucianism had nothing to do with the slow growth in the economy of China.

Talking about Pakistan’s economic indicators, Long said an economy with a tax-to-GDP ratio of less than 9% was not sustainable. He said it was hard for him to understand how Pakistan’s economic managers would bring down the fiscal deficit in next two to three years.

In response to the comment of a business student that Pakistan should stay away from all kinds of foreign aid and assistance to achieve self-reliance, Husain said the assumption that the Pakistani economy depended on US aid to survive was wrong. “Isolationism won’t solve our problems. Transfer of knowledge and technology is important. You’ve to be outward-oriented.”

KARACHI: Foreign delegates and local entrepreneurs discussed challenges facing businesses, sought greater industry-academia collaboration and highlighted business models to succeed in an emerging market at the 12th Management Association of Pakistan (MAP) Convention on Leadership Challenges for Business Success here on Wednesday.

Emerging markets will account for 80% of the world’s growth the next decade and Pakistan will be an important emerging market in future, Senior Vice President of Nokia India, Middle East and Africa Shivakumar said in a speech titled “Winning in emerging markets”.

Speaking to a conference packed with businessmen, Shivakumar – who is also the senior vice president of All India Management Association (AIMA) – said growth in developed economies has slowed down dramatically and the world is now looking at emerging markets, which account for 42% of population and 13% of income.

Pakistan is listed in four categories of emerging markets including Dow Jones 35 and emerging and growth level economies (EAGLES), he said. “Pakistan will be an important high-growth emerging market.”

In order to succeed in an emerging economy, he said, it is important to understand its segments and consumers. The emerging market consumers – most of whom live under $2 a day – are value-sensitive and not price-sensitive, he said and added entrepreneurs have to work on their business models to accommodate that segment of consumers who believe in the doctrine of “pay more, get more” and “pay less, get less”.

Sharing his experiences, he said, there are three things that he applied and succeeded. “Always put the country’s interest first, keep fixed costs very low and turn as many cost variables as possible,” he said.

“Never cut the features and offer your product at half the price. Consumers don’t want an incomplete product.”

Speaking to the participants earlier on, event’s chief guest and State Bank of Pakistan Governor Yaseen Anwar said it is time for all business leaders and managers to take the lead. Leaders must be more aware of the challenges facing the country – inflation, unemployment and power crisis.

There are no shortcuts to sustained economic development, Anwar said. “We need to develop the right strategies and then translate these strategies into action.”

AIMA President Rajiv Vastupal also addressed the event, saying IMF has lowered growth projection for both 2011 and 2012. “Today’s corporate leaders must focus on innovation to counter the global economic challenges,” he said. He elaborated the successful example of Apple’s iPad, which was launched during recession and earned a great success.

2. Bangladesh is still categorized by the World Bank among the least developed countries of the world because it started with a lower base than West Pakistan, and the loss of its Hindu business elite in 1947 left it worse off. It also didn't have the benefit of the large number of Muslim businessmen who migrated to West Pakistan, particularly Karachi, after partition.

3. Pakistani economist Dr. Ishrat Husain explains it well when he says that "although East Pakistan benefited from Ayub’s economic reforms in 1960s, the fact that these benefits were perceived as a dispensation from a quasi-colonial military regime to its colony—East Pakistan—proved to be lethal."

Mr. Bhutto Zardari uses his op-ed, published in the English-language Express Tribune newspaper, to enumerate what he sees as his mother’s achievements, including pushing women’s rights. The PPP in the 1980s could have used its popular position to unseat the military-run government of the time, but did not do so, he writes. “The PPP has always been careful to distinguish between the army as an institution and the dictator who abuses his position,” he says.

It’s a challenge to the military to stay out of politics. And it seems that army chief Gen. Ashfaq Parvez Kayani for now has no designs to take over the government.

Still, the PPP is a lot less popular in Pakistan than it was in Ms. Bhutto’s day and you sense her son feels that. In many places of the op-ed, it feels as if he is writing as the head of an opposition party, not co-chairman of the ruling PPP.

“We can only dream of what might have been had she lived,” he writes at one point of his mother.

He enumerates the challenges facing Pakistan –from education, to energy shortages to the investment-starved economy – but offers no solutions. It’s easy to forget reading it that the PPP is in power.

What we do know is that there are 86,000 more schools because of Shaheed Benazir Bhutto. That, under her government foreign investment quadrupled; energy production doubled; exports boomed. Under her government, 100,000 female health workers fanned out across the country, bringing health care, nutrition, pre and postnatal care, to millions of our poorest citizens. It was under her government that women were admitted as judges to the nation’s courts, that women’s police departments were established to help women who suffered from domestic violence and a women’s bank was established to give micro loans to women to start small businesses. It was under Shaheed Benazir Bhutto’s leadership that cell phones, fibre optics and international media were introduced, and the Pakistani software industry blossomed. And it was on her very first day as prime minister, that all political prisoners were freed, unions legalised and the press uncensored. It was an amazing record of accomplishment, made even more remarkable by the constraint of aborted tenures, by constant pressure from a hostile establishment and presidents with the power to sack elected governments.

Mr. Bhutto Zardari uses his op-ed, published in the English-language Express Tribune newspaper, to enumerate what he sees as his mother’s achievements, including pushing women’s rights. The PPP in the 1980s could have used its popular position to unseat the military-run government of the time, but did not do so, he writes. “The PPP has always been careful to distinguish between the army as an institution and the dictator who abuses his position,” he says.

It’s a challenge to the military to stay out of politics. And it seems that army chief Gen. Ashfaq Parvez Kayani for now has no designs to take over the government.

Still, the PPP is a lot less popular in Pakistan than it was in Ms. Bhutto’s day and you sense her son feels that. In many places of the op-ed, it feels as if he is writing as the head of an opposition party, not co-chairman of the ruling PPP.

“We can only dream of what might have been had she lived,” he writes at one point of his mother.

He enumerates the challenges facing Pakistan –from education, to energy shortages to the investment-starved economy – but offers no solutions. It’s easy to forget reading it that the PPP is in power.

What we do know is that there are 86,000 more schools because of Shaheed Benazir Bhutto. That, under her government foreign investment quadrupled; energy production doubled; exports boomed. Under her government, 100,000 female health workers fanned out across the country, bringing health care, nutrition, pre and postnatal care, to millions of our poorest citizens. It was under her government that women were admitted as judges to the nation’s courts, that women’s police departments were established to help women who suffered from domestic violence and a women’s bank was established to give micro loans to women to start small businesses. It was under Shaheed Benazir Bhutto’s leadership that cell phones, fibre optics and international media were introduced, and the Pakistani software industry blossomed. And it was on her very first day as prime minister, that all political prisoners were freed, unions legalised and the press uncensored. It was an amazing record of accomplishment, made even more remarkable by the constraint of aborted tenures, by constant pressure from a hostile establishment and presidents with the power to sack elected governments.

Here are some excerpts from an interesting Friday Times Op Ed on Pakistan's undocumented (informal & illegal) economy:

The economy is in the doldrums, but that is not news any more. What is more interesting, and more difficult to investigate, is what is happening in the world beyond the survey operator and tax collector's ambit. Papers published by the Social Policy Development Center (SPDC) in Karachi and the State Bank place the informal economy in a range of 20 to 30 percent of GDP. But most of this undocumented economy does not include strictly illegal, or shall we say criminal, practice.-------that militant groups are running their own businesses (during the TNSM's movement in Swat, emerald mines were reputed to be in the hands of Maulana Fazlullah's men); that militants and terrorists are even coming up with new ways to generate funds (kidnapping for ransom being a case in point). -------------According to data from the UN, Afghanistan produced about 90% of the global output of opium in 2007. This fell to just over 62% by 2010 (with Myanmar accounting for most of the rest). Three quarters of the poppy production was in the provinces of Helmand and Kandahar, which border Pakistan. Domestic consumption of opium in Afghanistan is next to nil. Also, the country does not legally import the chemicals needed to process opium into heroin, although these are imported in Pakistan for legitimate uses. Almost 7,000 metric tons of opium, both raw and processed, in the form of morphine and heroin, leaves Afghanistan and finds its way to the lucrative markets of Western Europe. -------------With close to 80 suicide attacks in 2010, about 400 rocket attacks, and about 350 bomb blasts in addition to target killings, use of improvised explosive devices etc, its not hard to deduce that there is a significant trade in arms and ammunition in Pakistan. The ISAF container scam case led to some interesting findings. There were the obvious conclusions - including that the abuse of the Afghan Transit Trade facility is massive. More tellingly, the Supreme Court's suo moto case found that 7,922 ISAF containers simply went missing. In addition to the packed meals, the alcohol and the camp supplies stamped with ISAF logos that appear in border markets, the possibility of pilferage of more dangerous items cannot be ruled out.

The smuggling masked by the Afghan Transit Trade is another story altogether, and according to some stakeholders extends to the illegal trade in timber, antiquities and gemstones stemming from that unfortunate nation. Being a neighbor to a land-locked, war-ravaged country with no semblance of law and order was never going to be easy. But Pakistan's governance failures have made a bad situation worse.

There's much more to Pakistan's economy than meets the eye, and many of the more interesting activities are practically impossible to investigate unless someone is prepared to take considerable personal risks. The few pieces of the jigsaw puzzle that are available from public data and information paint a tantalizing picture. If the downslide of the formal economy continues, things could get even more interesting.

Here are some excerpts from an interesting Friday Times Op Ed on Pakistan's undocumented (informal & illegal) economy:

The economy is in the doldrums, but that is not news any more. What is more interesting, and more difficult to investigate, is what is happening in the world beyond the survey operator and tax collector's ambit. Papers published by the Social Policy Development Center (SPDC) in Karachi and the State Bank place the informal economy in a range of 20 to 30 percent of GDP. But most of this undocumented economy does not include strictly illegal, or shall we say criminal, practice.-------that militant groups are running their own businesses (during the TNSM's movement in Swat, emerald mines were reputed to be in the hands of Maulana Fazlullah's men); that militants and terrorists are even coming up with new ways to generate funds (kidnapping for ransom being a case in point). -------------According to data from the UN, Afghanistan produced about 90% of the global output of opium in 2007. This fell to just over 62% by 2010 (with Myanmar accounting for most of the rest). Three quarters of the poppy production was in the provinces of Helmand and Kandahar, which border Pakistan. Domestic consumption of opium in Afghanistan is next to nil. Also, the country does not legally import the chemicals needed to process opium into heroin, although these are imported in Pakistan for legitimate uses. Almost 7,000 metric tons of opium, both raw and processed, in the form of morphine and heroin, leaves Afghanistan and finds its way to the lucrative markets of Western Europe. -------------Given that the global trade in opiates is estimated to have a value of some $70 billion, even a small proportion of the proceeds can make life comfortable for a lot of people in Pakistan.--------With close to 80 suicide attacks in 2010, about 400 rocket attacks, and about 350 bomb blasts in addition to target killings, use of improvised explosive devices etc, its not hard to deduce that there is a significant trade in arms and ammunition in Pakistan. The ISAF container scam case led to some interesting findings. There were the obvious conclusions - including that the abuse of the Afghan Transit Trade facility is massive. More tellingly, the Supreme Court's suo moto case found that 7,922 ISAF containers simply went missing. In addition to the packed meals, the alcohol and the camp supplies stamped with ISAF logos that appear in border markets, the possibility of pilferage of more dangerous items cannot be ruled out.

The smuggling masked by the Afghan Transit Trade is another story altogether, and according to some stakeholders extends to the illegal trade in timber, antiquities and gemstones stemming from that unfortunate nation. Being a neighbor to a land-locked, war-ravaged country with no semblance of law and order was never going to be easy. But Pakistan's governance failures have made a bad situation worse.

There's much more to Pakistan's economy than meets the eye, and many of the more interesting activities are practically impossible to investigate unless someone is prepared to take considerable personal risks. The few pieces of the jigsaw puzzle that are available from public data and information paint a tantalizing picture. If the downslide of the formal economy continues, things could get even more interesting.

The World Bank has observed that Pakistan’s weak economic growth is due to worsening security condition accompanied by greater political uncertainty and a breakdown in policy implementation. It predicted country’s economic growth at 3.9 per cent during the year 2012.---------According to the report, GDP growth rate in Pakistan would be 3.9 per cent during the year 2012 that was 2.4 per cent in 2011. Pakistan’s weak growth outturns are also tied to the worsening security situation, accompanied by greater political uncertainty and a breakdown in policy implementation. Infrastructure bottlenecks, including disruptions in power delivery, remain widespread. However, a notable bright spot has been the increased exports, evident particularly in the first half of 2011, led by textiles that surged 39 per cent in the first half of the year. ------------Industrial production surged to grow at a robust 32.1 per cent annualised pace during the three months ending in October (3m/3m, at seasonally adjusted annualised rates), after falling at 9.1 and 10.1 per cent rates during the first and second quarters, respectively. Part of the strengthening in growth reflects base effects due to the widespread flooding that had hampered activity in the second half of 2010. Indeed, because the floods occurred in July and August 2010, GDP growth on a fiscal year basis (ending June-2011) slowed to 2.4 per cent from 4.1 per cent of the fiscal year 2009-2010.

Worker remittances remain a critical source of foreign exchange in South Asia. Remittance inflows to Pakistan rose by an estimated 25 per cent in 2011, partly in response to the widespread flooding in the second half of 2010. When measured in local currency terms, given the appreciation of the dollar, remittances inflows to the region grew by a more vibrant 13 per cent in 2011 (median rate). Adjusting for inflation, worker remittances inflows to the region grew by a less robust 5.8 per cent (median rate) in local currency terms.

...Pakistan is South Asia’s second largest economy, representing about 15 per cent of regional GDP.----------The portion on Pakistan points out that the country’s economy firmed in the second half of 2011. Industrial production surged to grow at a robust 32.1pc annualised pace during the three months ending in October, after falling at 9.1 and 10.1pc rates during the first and second quarters, respectively.

Part of the strengthening in growth reflects base effects due to the widespread flooding that had hampered activity in the second half of 2010. Since the floods occurred in July and August 2010, GDP growth on a fiscal year basis (ending June-2011) slowed to 2.4pc.

The report notes that Pakistan’s weak growth outturns are also tied to “worsening security conditions, accompanied by greater political uncertainty and a breakdown in policy implementation”.

The report also notes that “infrastructure bottlenecks, including disruptions in power delivery,” remain widespread.

A notable bright spot has been a strengthening of exports, evident particularly in the first half of 2011, led by textiles that surged 39pc in the first half of the year.However, like India, Pakistan’s export volume growth saw a sharp fall-off in October.

Along with an upswing in worker remittances inflows, robust exports have supported Pakistan’s external positions and contributed to an improvement in the current account from a deficit of 0.9pc of GDP in 2010 to a surplus of close to 0.5pc of GDP in the 2011 calendar year.

The World Bank notes that monetary tightening in Pakistan brought about positive real lending rates in early 2011 as well, the first time since late 2009.------------The bank points out that for South Asian nations, including India and Pakistan, domestic crop conditions and price controls are more important determinants of domestic food price inflation.------------Regional monetary policy authorities face several challenges in reducing inflation.

More recently, currency devaluation has contributed to inflation as well. In Pakistan, monetary authorities have also been monetising the deficit, complicating the efficacy of other monetary policy efforts to reduce inflation.

A key factor working against monetary policy efforts is the overall stance of fiscal policy, which despite some consolidation, remains very loose.

Lower revenue growth has contributed to larger fiscal deficits in Pakistan. Terms of trade losses are estimated at about 1.9pc of GDP for the region in aggregate. India and Pakistan saw negative impacts of close to 1.8pc of GDP – estimated January through September 2011 terms of trade impacts relative to 2010.

Remittance inflow to Pakistan rose by an estimated 25pc in 2011, partly in response to the widespread flooding in the second half of 2010.

International reserve positions in South Asia have generally improved since mid-2008. Latest readings of foreign currency holdings were equivalent to at least three-months of merchandise imports in Pakistan.-----------A good crop year (2011-12) in much of South Asia and sustained high regional stocks are providing a buffer for grain prices and import demand in 2012....

...After devastating summer floods caused economic growth to slow to 2.4 per cent in the 2010/11 fiscal year, ADB country director for Pakistan Werner Liepach forecast growth to pick up to just 3.6 per cent in 2011/12. The government targets an expansion of 4.2 per cent.

“Short-term there are huge challenges… (the) next few months will continue to be protracted as there are repayments and not enough inflows, reserves will go down,” Liepach said.

“But I don’t see a crash coming, and I don’t see the economy taking off either and that’s not good enough.”

There is grave concern amongst analysts about a possible balance of payments crisis as Pakistan’s current account deficit has widened to $2.154 billion in the first six months of the 2011/12 fiscal year.

Pakistan had a surplus of $8 million in the same period last year.

The deficit is likely to widen further in the coming months because of debt repayments and a lack of external aid.

The country’s foreign exchange reserves stood at $16.90 billion in week ending Jan. 13, compared with its record of $18.31 billion in July last year.

The pressure on reserves is likely to continue especially as IMF repayments start from next month.---------Pakistan has to repay IMF about $1.1 billion by the end of 2011/12 fiscal year.

“Pakistan has huge potential and not all is negative or gloom and doom,” said Liepach. “I am positive in the long term if right decisions are taken today.”

Pakistan has been criticised over its slow implementation of fiscal reforms which include elimination of energy subsidies and restructuring of the state owned utilities.

The government also received criticism for not being committed towards implementing the necessary reforms to bring the economy back on track.

“The people who we are talking to in the government, technocrats, they are committed and want to see the benefits and improvements in Pakistan, they are very sincere in bringing a change in Pakistan,” said Liepach.

“But when you move away from the technocrat level, that’s when it becomes more complicated. It is a complex decision making system.”

Focus on projects and delivery of results

ADB’s focus and therefore assistance largely now revolves around projects with four core areas, energy, urban services, water infrastructure and irrigation, and transport.

“We want to fight poverty through growth and right now our business is focused on implementation of projects and to get results on ground,” said Liepach.

ADB does not require a letter of comfort from the IMF for approval or disbursement of project-based assistance.

ADB has an envelope of $2.9 billion for energy for Pakistan until 2016, out of which $1.4 billion has been utilised and $1.5 billion remains to be drawn down by the government.

Pakistan’s power sector faces a shortfall that often peaks at 5,000 megawatts per day.

For urban services, the board has approved $300 million, out of which $260 million remains, water infrastructure and irrigation $900 million has been approved with about $400 million left to be drawn down and $1.1 billion has been approved for transport, and $700 million is left.

Government can draw down the assistance when a project is approved and made effective.

“It’s a success when power reaches families and industries or when water becomes available to the families etc,” said Liepach.

Here's a Global Post story on NATO using smugglers to supply its troops in Afghanistan through Pakistan:

With few other options available to it since Pakistan closed its border crossings almost two months ago, NATO has at times resorted to paying local smugglers to get much-needed supplies to its troops fighting in Afghanistan, Pakistani officials say.

The Pakistani and Afghan smugglers, who must pay bribes to militants to travel safely through some areas, navigate treacherous routes over the 1,800-mile mountainous divide that separates the two countries to bring containers of oil, food and other essential items — all at a price — to soldiers on the other side.

“Borders mean nothing to us. We have been crossing in and out for centuries,” Sahib Khan, a smuggler who said NATO had hired him, told GlobalPost.

The hiring of illegal smugglers came after a failed attempt by NATO to pay private companies, which truck goods across the border under the Pakistan-Afghanistan Free Trade Agreement (PATA). These private companies, Pakistani officials said, were secretly swapping out their normal cargo for NATO supplies until Pakistani security forces caught wind of the scam.

A senior officer for the Frontier Corps, an elite military unit that is responsible for security along the border, told GlobalPost that a total ban on the movement of containers under PATA, which was signed in 2010 to promote bilateral trade, eventually foiled the strategy.

“We had concrete evidence that some of the containers being imported by private companies, under PATA, were being used to smuggle supplies for NATO troops under cover of commercial imports,” the official said.----------Smuggling between Pakistan and Afghanistan has long been a profitable and vibrant business. Various trade agreements have been signed between the two neighbors in a bid to contain the practice, but high import and export taxes coupled with little government oversight, thwarted those attempts.

Mostly items like flour, edible oil, lentils, dried vegetables, contraband cigarettes, and animals for meat are smuggled into Afghanistan, while spare auto parts, electronics and unregistered vehicles are smuggled the other direction.

Smuggling is so widespread that it has become the backbone of the economy in towns and villages along the border, where locally it is treated simply as normal trade. The mountainous terrain provides an edge over security to smugglers who regularly trickle across the border without any trouble.

Sahib said that most of the food and oil supplies he has carried across the border for NATO originate from the southern port city of Karachi, and are moved through Peshawar and Quetta, and finally through Pakistan’s tribal areas, which are largely under the authority of various militant groups.

For those militants, the smugglers have been an important source of income. Smugglers are required to pay “rahdari,” or “passage,” an unofficial tax that allows them safe passage.

“Once we are onto the route, it’s the responsibility of those who receive rahdari to ensure we are able to safely enter into Afghanistan,” Sahib said.

Any smuggling that is done on behalf of NATO can in no way make up for the closed borders, however. Smugglers say they carry between 20 and 25 small containers a day while, when the border crossings were open, NATO shipped an average of 250 large containers a day — making the reopening of the borders essential to the war effort.

The World Bank will extend an assistance of upto $5.5 billion over FY 12-14 to support Pakistan’s poverty reduction and development agenda, reports Pakistan Today.

According to Bank’s Country Partnership Strategy Progress Report, a mid term review and implementation assessment, the Bank has responded flexibly in the face of the tremendous challenges Pakistan has gone through over the past year or so.World Bank Country Director for Pakistan Rachid Benmessaoud said they will continue strong support to Pakistan while keeping a keen eye on implementation to ensure that these efforts translate into real results on the ground.The progress report says the overall focus of the Bank’s strategy- to help Pakistan’s economy get back onto the path of high, sustained growth –remains valid and consistent with the overall priorities of the government of Pakistan as articulated in its New Framework for Growth Strategy. Also, the Bank support will remain centred on the original pillars of the CPS- the economic governance, human development and social protection; infrastructure and security and conflict risk reduction.The Bank engagement over FY 12-14 is projected at up to $ 4 billion in new International Development Association (IDA) credits and International Bank for Reconstruction and Development loans. This will be supplemented by a robust programme under the Multi donors trust fund (MDTF) with initial commitment of $ 140 million and IFC support projected at $ 1.5 billion.

Pakistan holds enormous potential for economic growth, said State Bank of Pakistan (SBP) Governor Yaseen Anwar, according to Daily Times:

“I’m, personally, optimistic about the country’s future, and confident that our economic managers – who have steered the country through much choppier seas – will guide this resilient economy to the path of stability and prosperity,” the governor said. Delivering his key-note address on ‘The State of Pakistan’s Economy’ at a seminar organised by the Management Association of Pakistan (MAP) at a local hotel in Lahore on Thursday, he emphasised that our economy’s resilience may well be unparalleled as we have survived two major floods; one catastrophic earthquake; a war on one border; and a balance of payments crisis – all in the past decade without any bouts of hyperinflation, a run on bank deposits or a deep recession.

“This only goes to show the enormous potential for growth that the country holds,” he added. He said that while Pakistan’s economy is going through some testing times, the challenge in front of us can scarcely be classified as daunting. “Our twin deficits are, in my opinion, the most significant challenge at the moment. Even then, it is not the size that’s the problem; it’s the situation. And unlike the problems that engulf the economies of the West, we know precisely what needs to be done. In that regard, we are extremely fortunate,” the SBP governor added.

Anwar said, “We know what our problems are. Unlike many other countries, the solutions to our problems are straightforward. All they require is a good measure of willpower and the determination to see reforms through these interesting and challenging times.”

He said that despite the fiscal deficit, the country’s debt-to-gross domestic product (GDP) ratio has not increased substantially; in fact, it has declined in the last three years. “To put this in perspective, Pakistan’s debt-to-GDP ratio is half that of most European countries and one-third that of Japan, he said, adding that most of the country’s debt is denominated in rupees and the external debt is long-term in nature. Thus, I believe there is absolutely no chance that Pakistan will be facing a Greece-like debt crisis anytime in the near future,” Anwar added.-------------The SBP governor said that it is the financing of the current account deficit that will remain a challenge this year. ‘Net financial inflows have slowed down to only $1.9 billion in FY11 after peaking at $8.7 billion in FY07. To manage the situation, the bank has entered into currency swap agreements with Turkey and China in order to mitigate the pressure of any adverse development in the developed world on our external accounts and reserves,’ he said, adding that other such arrangements are in the pipeline with other countries that could relieve pressure on our external accounts.

Here are "Ten Things for India to Achieve its 2050 Potential", brought out by Jim O'Neill, Head Global Research at Goldman Sachs, and Tushar Poddar, V-P Research, Asia Economic Research Team at Goldman Sachs India, as reported by India's Economic Times:

Here are some excerpts from a Businessweek piece titled "India, Interrupted":

For much of India’s post-independence history, the country was an economic basket case—a textbook example of financial mismanagement, wasted potential, and stunted growth. Then, in the 1990s, after India embarked on market reforms and began opening its closed, semi-socialist economy, the narrative changed. As native companies aggressively acquired international brands, and as growth rates approached double digits, the media was full of triumphalist rhetoric about impending “economic superpowerhood.”

Over the last few months the narrative appears to have shifted again. Growth has slowed from more than 10 percent in 2010 to around 7 percent today. Inflation is persistently high, agricultural productivity has declined, and foreign investment and the stock market are down. Social unrest and deteriorating law and order in many parts of the country have potential investors spooked. Corruption is estimated to cost India at least $18.4 billion a year.

A recent Economist headline on the nation’s growth prospects read: “Slip-sliding away.” At the meeting of the World Economic Forum in Davos, Switzerland, India’s trade minister, Anand Sharma, was questioned by journalists about everything from corruption to inflation to social inequality. “Why are you picking on India?” the minister was reduced to asking. “What is going wrong with us?”

The truth is that India’s prospects were never quite as bright as they were made out to be—nor are they quite as dire as they are held to be today. Instead, the recent swings in the Indian narrative are another reminder of the role of sentiment in investors’ perceptions and decisions. Nations, like markets, are subject to often irrational (and certainly ill-informed) cycles of boom and bust.------------------Over the last few years, I’ve had occasion to spend considerable time in the Indian countryside, in villages and farms in the southern state of Tamil Nadu. These places are important to understanding India. For all the hype about the cities and their technology industries, some 70 percent of the population still lives in the countryside.

What I’ve seen is considerably more nuanced than is suggested by either the optimistic or pessimistic narratives of modern India. The villages around here are layered with stories of triumph and hardship, success and failure. Farming is dying, a reminder of the nation’s declining agricultural productivity, which threatens food security and rural livelihoods. The environmental damage wrought by India’s rapid growth is apparent in polluted bodies of water and steaming mounds of uncollected waste.

But for all these problems, there are also signs of India’s promise. People who have quit farming become entrepreneurs; they open cell-phone stores and restaurants and other small enterprises that drive an emerging new rural economy. Young men (and increasingly women) go to college; their horizons are far wider than their parents could have ever imagined.

Here are excerpts of an Express Tribune by Dr. Ishrat Husain on investments & rule-of-law:

Growth rates in Pakistan since 2008 have declined to almost half of the level achieved in the preceding four years. The investment ratio in 2010-11 has been the lowest in the history of Pakistan. Most of the discussion on the stagnation and decline of the economy has rightly focused on fiscal deficits, energy shortages, inflation, and high interest rates. But the relationship between the rule of law and investment and business development is not much talked about in popular discourse. In the absence of a conducive legal environment, uncertainties created by other factors such as political instability, security, law and order, energy, etc., would make matters worse. But a well-functioning judicial system can reassure the investor and act as a countervailing force to these other negative attributes. An investor will part with his financial savings and share his expertise and experience only when he is assured that the firm will make profits. To achieve this, non-discriminatory and impartial application of law, enforcement of contracts, protection of property rights and speedy disposal of cases are necessary.-----------------While we all rightly criticise the informal jirgas, sardari practices and Qazi Courts, the fact remains that we have been unable to extract the essential ingredients of these informal systems and enrich the formal legal systems. The uprising in Malakand Division was inspired by the mullahs who contrasted the speedy and expeditious justice of the Shariah Courts in the days of Wali of Swat, with the established judicial system applied in the area since the merger of Malakand in the province of Khyber-Pakhtunkhwa. ---------Access to judiciary is limited to only those who can afford good lawyers and pay their enormous fees and expenses. Unequal access to justice is one of the main factors that perpetuates the patronage capacity of politicians and, in turn, leads to poor economic governance. Feudalistic ethos that pervades our governance structure cannot be altered until all citizens are treated equally by law. Today, it is only the rich who can manipulate the system to their advantage.-----------As one of the leading Pakistani lawyers has so aptly commented that the English model –– on which the Code of Civil Procedures (CPC) 1908 was based –– was discarded even in England, a long time ago. The English model “preferred form over substance on account of this fundamental flaw, litigations continue in Pakistan for decades while lawyers squabble over issues of virtually no consequence. In each litigation there is a lawyer seeking justice for his client and an opposing lawyer who will very successfully prolong and delay the litigation, while liberally drawing upon various dilatory provision of CPC. Knock outs on the basis of hyper-technicalities and the causing of abnormal delays are, in fact, appreciated and considered ‘assets’ and ‘qualities’ of astute lawyers.”

Here's a summary of Pakistan's economy since 2008 as published in The Nation:

Pakistan’s macroeconomic indicators had shown a declining trend in last three years (fiscal years 2008-9 to 2010-11) mainly because of disastrous floods and also involvement in the war on terror.

According to the Poverty Reduction Strategy Papers (PRSP), Pakistan’s economy witnessed a sharp downturn in last fiscal year 2010-11 and recorded at 2.4 percent, whereas in year 2009-2010 the economy saw a rise in GDP growth i.e. 3.8 percent compared to the 1.7 percent of the year 2008-2009.

During the course of last three years, inflationary pressures have intensified and caused serious threats to macroeconomic stability. In fiscal year 2008-09, the observed inflation rate was 17.03 per cent that fell down to 10.10 percent in 2009-10 and then again witnessed a rise of 13.7 percent during the year 2010-11. However, GDP at current market price increased from Rs 12,724 billion in 2008-09 to Rs 18,063 billion in 2010-11.

The PRSP further revealed that investment as percentage of the GDP fell to 13.4 percent in fiscal year 2010-11 from 18.2 percent in 2008-9. The deceleration in investment owes mainly to the intensification of war on terror, the haphazard security environment and high profile killings over the last few years. On the contrary, the national savings as percentage of GDP showed some resilience and marked a growth of 13.6 percent in the FY 2010-11 as compared to FY 2009-10 in which growth was 13.1 percent. Despite this increase in growth rate, the national savings fell short of the targeted rates.

The nominal exchange rate (Rs/$) has been on an increasing trajectory over the last three years. The exchange rate reached a record level of 85 (Rs/$) in FY2010-11 as compared to 78.5 in FY2008-09 and 83.8 in FY 2009-10 (i.e. 78.5 & 83.8) almost meeting the projected PRSP nominal exchange rates. The population rate is on a continual rise since last three years, notably from 168.2 million in FY 2008-9 to 175.31 million in FY 2010-11.

Meanwhile, during the last three years, Pakistan’s fiscal position worsened considerably as its fiscal deficit rose to Rs 1194.4 billion in FY 2010-11 from Rs. 680.4 billion in FY 2008-9. The increase in current expenditures was at the cost of drastic cuts in development expenditures. The catastrophic floods that hit Pakistan slowed the economic growth drastically and posed grave challenges for limited revenues. The urgent additional spending to meet the humanitarian and reconstruction needs worsened the fiscal balance. Fiscal deficit as a percentage of GDP has seen a persistent increase in the last few years. Fiscal deficit rose from 5.3 percent in FY2008-9 to 6.6 percent in FY 2010-11.

A low and decreasing tax to GDP ratio and increasing public debt stock has imposed a constraint on fiscal stimulus to support revival of growth momentum needed for the economy. Pakistan is confronted with the issue of stagnant tax to GDP ratio; owing mainly to structural deficiencies in the tax and administration system.-------Exchange rate of Pak Rupee reflected stability during the course of three years as it depreciated nominally by 0.7 percent in FY 2010-11 against 4.7 percent in FY 2009-10 and 12 percent in FY2008-9. This improved stability in Pak Rupee/US$ is attributable to encouraging performance witnessed in the external account.

It’s early morning in Karachi, Pakistan’s biggest city, and Muhammad Nasir is outside his makeshift shelter of palm leaves, rags, and bamboo, washing up after breakfast. He uses water stolen from a nearby supply pipe that belongs to the local water utility. The 17-year-old bids farewell to his mother, an unlicensed midwife, and walks to his tire-repair shop, an open-air stand in a residential area with a table of tools and a wooden bench. He checks to make sure the electricity he’s drawing illegally from the overhead power line is on so he can run his tire pump. Then he sends 10-year-old Abid, one of his two employees, along with 12-year-old Irfan, to get tea from a nearby shop.

Nasir’s business, his home, his power and water supply, and even the cup of tea Abid brings him don’t exist in Pakistan’s official figures. They’re part of another economy that doesn’t pay taxes or heed regulations. It probably employs more than three quarters of the nation’s 54 million workers and is worth as much as 50 percent of Pakistan’s 18 trillion rupee ($200 billion) official gross domestic product. And while the documented economy had its smallest expansion in a decade at 2.4 percent in the year ended June 2011, soaring demand for cars, cement for houses, and other goods shows the underground market is thriving.----------the nation’s purchasing power is more than estimated, says Nadeem Naqvi, managing director of the Karachi Stock Exchange. Rising crop prices have pumped an extra 1 trillion rupees into the rural economy in the past four years, most of it undocumented, Naqvi says. He estimates agriculture may account for as much as 35 percent of GDP, instead of the 21 percent reported.

Evidence of consumer demand is everywhere as new shopping malls and restaurants in Karachi are filled to capacity. Car sales rose 14 percent in February from a year earlier, as more people could afford a Toyota Corolla or Suzuki Mehran (a small hatchback), according to the Pakistan Automotive Manufacturers Association. More than half a million motorbikes hit the road in the eight months ended February, a 5 percent increase, perhaps a sign that Nasir’s tire business has a bright future. ..---------The bottom line: If participants in Pakistan’s undocumented economy paid their taxes, the government would collect an extra 800 billion rupees.

Here's an Express Tribune report on Pakistan economic growth in current fiscal year:

Pakistan’s economy grew by 3.2%, which is much below the official target and the required growth rate, leaving at least 1.3 million people jobless this year.

“According to a provisional assessment, gross domestic product (GDP) grew by 3.2% in the financial year 2011-12 ending June 30,” said Sohail Ahmad, Secretary of Statistics Division, after chairing the 91st meeting of the National Accounts Committee, convened to finalise the growth figure.

Estimates are based on provisional information for eight to nine months, which is used for projection for the entire year.

This growth figure remains below the target of 4.2% and even less than the conservative estimates of the International Monetary Fund and the Asian Development Bank that put the growth at 3.6%.

The committee’s data shows that the major push came from commodity producing sectors – agriculture and industry – as the government missed its services growth target with a wide margin.

Net national income increased by Rs282.5 billion and, with the year’s population growth rate at 2.05%, per capita income rose by 1.3%.

“The growth rate is not enough to absorb two million people entering the job market every year,” said Dr Ashfaque Hasan Khan, Dean Business School of NUST. For creating jobs for the new entrants, a 7% to 8% growth was required, but due to the low rate 1.2 to 1.3 million young people remained unemployed this year.

Average growth for the last five years – covering all the period of Pakistan Peoples Party-led coalition government which came to power in March 2008 – stood at just 2.58%. In 2008, the economy grew by 2.2%, in 2009 2.8%, in 2010 1.8% and in 2011 3%, said Arif Cheema, Director General of Pakistan Bureau of Statistics.

Agriculture sector (24.7% of GDP)

The agricultural sector that pushed the overall growth rate up saw a robust growth due to improvement in soil fertility after floods for two years. Against the target of 3.4%, the sector grew by 3.6%.

Targets for major crops and forestry growth were surpassed. Compared to the target of 3%, major crops grew by 6.1% while forestry growth was 4.1% against the target of 2%.

However, production of minor crops dropped 2% against the target of 2% growth. Targets for wheat, sugarcane and rice production were also missed. Against the target of 25 million tons, wheat output was 23.5 million tons.

Rice production stood at 6.2 million tons compared to the target of 6.6 million tons while sugarcane harvest remained at 56.3 million tons against the target of 57.6 million tons.

Industrial sector (22.2% of GDP)

The industrial sector, which rose by 1.9% last year, expanded 3.6% this year because of growth in electricity, gas and water supply sub-sectors. The industrial growth target was 3.2%. Electricity and gas sectors grew by 15.5% against the target of just 1%. “We have added subsidies to the output of electricity generation, which is according to international norms,” said Arif Cheema.

Growth rate for mining and quarrying stood at 1.7% against the target of 1% while the manufacturing sector grew by 2.4% against the target of 3.7%. In the manufacturing sector, large-scale manufacturing rose by just 1.64% while the construction sub-sector, which last year contracted by around 1%, saw a growth of 2.8% this year.

Services sector (53.1% of GDP)

The government missed the services sector growthtarget of 5% by a wide margin, as the biggest component of the economy rose by just 2.2% due to contraction in banking and financial sectors.

The finance and insurance sectors contracted by 11%, said Arif Cheema. The growth targets of all sub-sectors, except for ownership and dwellings, were missed....

"While Benazir Bhutto hated the generals for executing her father, Nawaz Sharif early on figured out that they held the real power in Pakistan. His father had established a foundry in 1939 and, together with six brothers, had struggled for years only to see their business nationalized by Ali Bhutto’s regime in 1972. This sealed decades of enmity between the Bhuttos and the Sharifs. Following the military coup and General Zia’s assumption of power, the business—Ittefaq—was returned to family hands in 1980. Nawaz Sharif became a director and cultivated relations with senior military officers. This led to his appointment as finance minister of Punjab and then election as chief minister of this most populous province in 1985. During the 1980s and early 1990s, given Sharif ’s political control of Punjab and eventual prime ministership of the country, Ittefaq Industries grew from its original single foundry into 30 businesses producing steel, sugar, paper, and textiles, with combined revenues of $400 million, making it one of the biggest private conglomerates in the nation. As in many other countries, when you control the political realm, you can get anything you want in the economic realm."-----------Like Bhutto, offshore companies have been linked to Sharif, three in the British Virgin Islands by the names of Nescoll, Nielson, and Shamrock and another in the Channel Islands known as Chandron Jersey Pvt. Ltd. Some of these entities allegedly were used to facilitate purchase of four rather grand flats on Park Lane in London, at various times occupied by Sharif family members. Reportedly, payment transfers were made to Banque Paribas en Suisse, which then instructed Sharif ’s offshore companies Nescoll and Nielson to purchase the four luxury suites.-----------Upon taking office in 1988, Bhutto reportedly appointed 26,000 party hacks to state jobs, including positions in state-owned banks. An orgy of lending without proper collateral followed. Allegedly, Bhutto and Zardari “gave instructions for billions of rupees of unsecured government loans to be given to 50 large projects. The loans were sanctioned in the names of ‘front men’ but went to the ‘Bhutto-Zardari combine.’ ” Zardari suggested that such loans are “normal in the Third World to encourage industrialisation.” He used 421 million rupees (about £10 million) to acquire a major interest in three new sugar mills, all done through nominees acting on his behalf. In another deal he allegedly received a 40 million rupee kickback on a contract involving the Pakistan Steel Mill, handled by two of his cronies. Along the way Zardari acquired a succession of nicknames: Mr. 5 Percent, Mr. 10 Percent, Mr. 20 Percent, Mr. 30 Percent, and finally, in Bhutto’s second term when he was appointed “minister of investments,” Mr. 100 Percent.

Here's an ET piece on history of economic growth under various leaders since 1947:

The Express Tribune took the trouble to go through Pakistan’s historical GDP growth rates and compared various governments. We used GDP growth numbers from the Pakistan Bureau of Statistics records, which go all the way back to fiscal year 1952. We then calculated the geometric average (which calculates the compound average growth rate) rather than the simple arithmetic average to calculate the growth rates during the entire tenure of a government and then we ranked them. The results were somewhat surprising.

For instance, former President Ayub Khan – widely regarded as Pakistan’s best ruler when it comes to economic growth – is actually in second place. The number one spot is held by former President Ziaul Haq, who averaged 5.88% growth during his 11 years in office.

For fans of President Ayub who insist that his record before the 1965 war was better, we checked: it is not true. Pakistan’s growth rate during that period averaged 5.73% per year, which is actually lower than President Ayub’s own overall average of 5.82%. Having said that, industrial growth from the 1958 coup to the 1965 war averaged 9.21%, higher than any Pakistani ruler’s record, including Ayub’s own overall average of 8.51%.

Another surprising insight: if one ranks the ten rulers Pakistan has had since 1952 according to the average economic growth rate during their tenure, both the top five and the bottom five include three dictators and two democrats.

Yes, the top three slots are undoubtedly all taken up by the usual suspects: former Presidents Ziaul Haq, Ayub Khan and Pervez Musharraf, in that order. The next two are somewhat surprising: Benazir Bhutto comes in at fourth place and her father Zulfikar Ali Bhutto is not far behind. The supposedly pro-markets Nawaz Sharif comes in at seventh place.

Yet another surprise: Benazir Bhutto’s average was 5.08%, not far off from Pervez Musharraf’s 5.14%. She beat her rival Nawaz Sharif by a full percentage point: Pakistan’s economic growth averaged 4.06% during Nawaz Sharif’s both terms as prime minister.

Length of time in office appears to matter far more than whether the ruler was a dictator or a democrat. The top three were all in office for at least nine years, with the top two each in office for eleven years. Yahya Khan, Iskandar Mirza and Ghulam Muhammad – none of whom was democratically elected or subject to a popular mandate – all come in close to the bottom of the rankings. None of them had longer than four years in office.

But the more intriguing question to ask is why both the Bhuttos vastly outperform Nawaz Sharif.

The answer lies in the breakup of the GDP number: while Nawaz beat both Bhuttos on industrial growth, he was abysmal when it comes to agriculture. Benazir Bhutto was the best in Pakistani history for agriculture, which grew at an average of 6.65% during her five years in office.

Zulfikar Ali Bhutto, meanwhile, had blowout growth in services, averaging 10.63% during his only term in office, the highest of any Pakistani ruler. (Oddly enough, the elder Bhutto had a poor track record on agriculture, despite his family background. Agriculture grew at a paltry 2.12% per year during his tenure, worse even than Nawaz.)

For those who are currently pessimistic about Pakistan’s economic prospects, you may find some comfort in knowing that the numbers back you up: President Asif Ali Zardari ranks dead last in terms of economic growth, averaging a paltry 2.62% during his term in office so far.

Here's an interesting perspective on Pak economy in a Dawn Op Ed by Akbar Zaidi:

Is the analysis that this is Pakistan’s worst-ever economic performance valid, or is this merely point-scoring and political posturing by those who represent different political dispensations?

Many of the key economic numbers which are to be announced later this month in the Economic Survey will show that some are, indeed, the worst ever, or at least the worst in the last 50 years. While inflation was higher during the Z.A Bhutto government, there has hardly been a month of the 51 months in power of this government, when it has not been in double digits; this is a notorious first.

Similarly, the fiscal deficit has been in the range of 4-6.5 per cent under this government, but was higher — often more than eight per cent of GDP — under Gen Ziaul Haq’s military rule. The growth rate in the pre-9/11 Musharraf three years 1999-2002, after which his government received a bonanza and huge windfall, was a mere three per cent, but it has been lower, though only slightly so, over the last four years.

Overall domestic debt, which has been growing over the last four years, is still much lower than that which was accumulated over the Ziaul Haq period and in the period between 1988-1999. However, two indicators which are considerably worse and are particularly worrying are the falling tax-to-GDP ratio and investment.

There are numerous other indicators related to the economy, which have never been this good, despite problems in slowing trends. Per capita income continues to rise albeit at a slower pace; remittances and exports have also improved; and poverty is probably lower than many were expecting, given Pakistan’s slow growth and rising and persistent food inflation.

Any fair, unbiased account of the state of Pakistan’s economy shows that while parts of Pakistan’s economy have been in a poor state, this is certainly not the worst period ever. Moreover, many of the factors which have affected the current state of affairs have their origin in the policies of the Musharraf era.

Nevertheless, what is perhaps striking about the last four years has been the poor and wavering economic management and leadership of the economic team. The absence of vision, insight and any clear idea of what needs to be done, given Pakistan’s persistent and, in many cases serious and growing, economic problems, has been the most striking aspect in the leadership of the Ministry of Finance and the Planning Commission.

A committed and more able leadership was critical to improving Pakistan’s economic situation, and in this perhaps lies the government’s biggest failure. While it is clear that the economy’s overall performance has certainly not been the ‘worst ever’, the verdict on the economic team and its leadership, is less certain.

Here's a Daily Mail piece on the economic history of the world since Jesus:

A stunning chart that shows the entire economic history of the world's most powerful countries over the past 2,000 years has been released by investment bank JP Morgan.

Viewed as a whole, the graph shows the creeping restoration of Asian economic supremacy as the rest-of-the-world catches up to the West and its levels of industrialisation.

Charting the globe's 10 major powers since the time of Jesus, the graph can be broken down by simply applying a cut off point at around the 1800 AD mark.

That was the birth of the Industrial Revolution in the U.K. and when taken into account, everything to the left of that mark can bee seen as economic power through sheer size of population and to the right is the effect of mass production on a country's economic output.

One feature of the simple graph is to show that up until around 1500 AD India and China accounted for between 50 and 60 percent of the world's economy until the late 18th century when the Industrial Revolution rendered countries with large populations, just countries with the largest populations.

In 1 AD, China had a population of almost 60 million people, while the United States had a population of 680,000.

It took the United States 1800 years to overtake China's economic output.

But by 1950, even though the U.S had a population three times less than China, it's economic output was three times as great.

Additionally, in 1913, China had a population of 437 million and the U.K. had a population of 45 million, but their economic output was almost identical.

Indeed, when the graph is broken down into its constituent parts, the analysis of what happened in Europe and later the United States shows that the Western lead was taken even before 1800.

For the majority of human history the most important factor in economic growth was the relationship between births and deaths.

If there were too many births then there was not enough food to go around and without mass production techniques people went without until there was starvation or disease.

After a higher death rate, a stable supply of food was re-established, goods were shared among a smaller group of people and everyone felt and became richer until the cycle occurred again.

However, between 1000 AD and 1500 AD, wages, or GDP per capita had started to slowly rise as small economies of scale were made in agrarian organisation and moderate technological advances were made which improved the quality and length of life.

If a similar graph is opened up to show the world from Jesus to Napoleon, the slow building growth especially of Europe is clear to see, even without factoring in the Industrial Revolution.

However, if the graph is expanded to show the world from 1500 to World War I then the effect of mechanisation on the planets economic growth is clear.

Theories about why the Industrial Revolution occurred in the U.K. and then Northern Europe include the dense, localised population, easy availability of natural resources and the mild climate that exists around the North Sea and the U.K. for cotton spinning.----------As the world escaped the trap foreseen by Thomas Malthus of a rising population never matched by food production, population and GDP exploded.

The industrial revolution changed the Malthusian Trap leading to a situation today where the U.S. accounts for five percent of the world population and 21 percent of its GDP whereas Asia (minus Japan) has 60 percent of the world's population and only 30 percent of its GDP.

Here's a PakistanToday story on Pakistan's current GDP being closer to $300 Billion:

The actual Gross Domestic Product (GDP) of Pakistan is nearer to $300 billion and not $210 billion, as is shown officially. And, if the ailing economy of the troubled Pakistan is assumed to grow by 3 per cent per year by 2015 the size of the actual GDP would likely to set between $ 350 and $ 375 billion. This was stated by Managing Director KSE Nadeem Naqvi while briefing the visiting V. Shankar, Member of the Board, Standard Chartered Bank PLC and CEO Europe, Middle East, Africa and Americas here at Karachi Stock Exchange (KSE) on Wednesday.“Using conservative estimates, 50 per cent of the economy is in the undocumented sector,” Naqvi said adding that further estimation showed that the per capita income of top 10 per cent of households in Pakistan was near $5,000 versus national per capita income of $1,190.“This represents a significant potential market for investment and financial services,” the MD added. Also, Naqvi highlighted the areas where KSE and SCBPL could cooperate that, he said, include investor awareness generation, attracting Non-Resident Pakistanis (NRPs) to the capital market and helping private companies list on the Exchange. Earlier, Shankar, accompanied by Mohsin Nathani, Chief Executive of Standard Chartered Bank (Pakistan) Limited (SCBPL) and senior members of his management team, rang the “Opening Bell” of the KSE in the presence of Chairman KSE Muneer Kamal, MD Nadeem Naqvi, DMD KSE Haroon Askari and directors of the KSE Board.On the occasion Shankar said there was tremendous opportunity for growth in intra-regional trade for the South Asian economies, particularly India and Pakistan. Illustrating India-China bilateral trade, he said when Sino-Indian trade opened up they had to overcome some apprehensions, however, today they were one of the largest trading partners with benefit to both countries. Welcoming the guests, chairman KSE Muneer Kamal said Pakistan’s economy was at an inflection point. Despite challenges posed by low tax-to-GDP ratio, power sector difficulties and current account pressure due to demand slowdown in key export markets, Pakistan at present was in a position to repay IMF loans.The foreign exchange reserves, supported by strong remittances by overseas Pakistanis, were in a much healthier position than at the height of global financial crisis in late 2008. While debt servicing burden had risen, it should be viewed in the global context and Pakistan’s total debt-to-GDP ratio of 64 per cent was far lower than many Euro zone and G-8 economies.A concerted effort to mobilise tax revenue and focus on emerging domestic energy resources such as coal would go a long way in fixing structural deficiencies causing large budget deficits. Kamal highlighted that economic growth can be further accelerated with growing intra-regional trade in the sub-continent. He pointed out that while intra-regional trade in East Asia was 23 per cent of GDP, it was only 1 per cent of the GDP in South Asia.

Here's a Nation report on total loans and grants for Pakistan since 1985:

Pakistan received over $72.26 billion in the shape of grants and loans from different countries and international financial institutions during 1985 to June 2012.

During this period, 24 countries and 13 different global lending agencies gave loans of over $59.24 billion to Pakistan while 32 states and 13 financial organisations lent country over $13.02 billion in the shape of grants. Cash received against IMF stand-by programme is not included in these figures, it has been learnt.

According to figures released by Financial Division, from 1985 to June 2012, Pakistan received $15,937 million from Asian Development Bank (ADB), $11,076 million from IDA, $5,842 million from IBRD, $5,717 million from Japan, $6,457 million from IDB, $3,666 million from USA and $3,400 million from China.

The report further revealed that Pakistan received $6.37 billion during former Prime Minister Muhammad Khan Junejo’s regime while $23.01 billion in Musharraf era whereas the incumbent government received $14 billion until June 2012 from different countries and global financial institutions.

Pakistan has repaid $10.3 billion between 2000 and 2011-12 to various bilateral and multilateral donors, excluding the International Monetary Fund (IMF). Data obtained by Business Recorder showed that actual payments from 2000-01 till 2011-12 pertaining to loans that were signed after July 2000 stood at $10.37 billion: total loans amounted to $5.7 billion, $4.45 billion was interest and commitment charges were $157 million.

Data also showed that the Islamic Development Bank (IDB) was repaid $3.08 billion with $2.9 billion as actual amount of loan while $199 billion was paid as interest. Asian Development Bank (ADB) has been repaid $1.8 billion, including $1.3 billion actual loan with $461 million interest while $32 million was paid as commitment charges.

France has been repaid $1.02 billion, including $218.3 million actual loan amount and $809 million interest while commitment charges were $470,000. The US, one of the major financial assistance providers to Pakistan, was repaid $336.2 million, including $59.1 million actual loan amount and interest of $277 million.

The UAE was repaid $13.6 million ($1 million actual loan plus $12.5 million interest), Turk Exim Bank was repaid $64.5 million ($51.6 actual loan plus $12.9 interest), Switzerland $27.9 million, including $11.1 million actual loan and $16.8 million interest, Sweden was repaid $62.7 million ($19.6 million actual loan plus $43.1 million interest) and Saudi Arabia was repaid $390 million from 2000-2001 till 2011-12.

Documents also showed that Russia received $77.5 million as repayment, including $19.7 million actual loan with $57.8 million interest. Japan received $1.1 billion against actual loan of $185.8 million, Italy was repaid $18.6 million, Austria $53.5 million against actual loan of $18.2 million and Canada was repaid $38.7 million while the actual loan amount was $12 million. Germany was repaid $314.2 million while International Bank of Reconstruction and Development (IBRD) and International Development Association (IDA) have been repaid $422.2 million against the actual loan amount of $33 million.

It is of interest to note that Dr. Husain said this in 2007, when the economy was still booming, and the very next year Pakistan was back in IMF intensive care. So we can only marvel at the insight and prescience of Dr. Husain that he could see it coming even during the boom-days.

If you go to the IMF folder for Pakistan, http://alturl.com/uccmb, and then subtract repayments (total) from disbursements (total) for all, you can clearly see the years in which Pakistan has been a NET borrower from the IMF.

The results are shown below.

Do you notice anything special? Do you see how accurate Dr. Husain was when he said "extremely vulnerable to external conditions"? Can you see how every little bump on the road immediately sends us back into the IMF Intensive Care Unit? Can you see how every little vibration causes our whole economy to rattle, shake violently and face collapse? Can you see the wake of following events in the IMF's Pakistan Record?

The only bright spot is that we seemed to have escaped the 1997 Asian Financial Crisis, mainly because we had very little trade or financial links at that time with the ASEAN+ countries anyway.

On the other hand, note that India was ONLY affected by the 1991 South-Asian Financial Crisis. It managed to just shrug-off the Japanese crash, the Middle-eastern troubles, the Nuclear-test Sanctions, the Internet Bubble and even the latest 2008 Global Financial Crisis. Why is that, Dr. Haq? After all, except in areas where Pakistan is clearly superior, Pakistan and India are more or less equivalent, aren't they?

Most of the world's economies that rely on external inflows to balance their current accounts are "extremely vulnerable to external conditions".

Noting India's significant dependence on foreign capital inflows, Goldman Sachs' Jim O'Neill raised a concern about the potential for current account crisis. "India has the risk of ... if they're not careful, a balance of payments crisis. They shouldn't raise people's hopes of FDI and then in a week say, 'we're only joking'". "India's inability to raise its share of global FDI is very disappointing," he said.

Your summary of our Economy from 1947-2010 is good one on the whole. However, it lacks an analysis of directional trends. For example, if our economy "grew at a fairly impressive rate of 6 percent per year", was must of this growth back-loaded or front-loaded or was it more equally distributed? Is there a long-term trend visible in GDP growthrates? If so, is this long-term trend upwards or downwards?

Analysis of such trends are far more important while attempting to predict the future trajectory of our economy.

Here are some issues for you to start thinking about in terms the trajectories of long-term (30 years) trends in our economy:

HWJ: "Analysis of such trends are far more important while attempting to predict the future trajectory of our economy."

Not when analyses lead you away from the reality of Pak economy.

The reality is that Pakistanis are seeing rising incomes.

There were 1.8 million Pakistani households (7.55% of all households) and 7.9 million Indian households (3.61% of all households) in 2009 with disposable incomes of $10,001 or more, according to Euromonitor.

This translates into 282% increase (vs 232% in India) from 1995-2009 in households with disposable incomes of $10,001 or more.

3) Creating a competitive environment of high economic growth by focusing on the productive sectors of our economy such as agriculture and manufacturing, and

4) Focusing on infrastructure and energy sectors to facilitate the economic growth.

Whereas, we have seen efforts in the past to address these weaknesses they have been at best weak and far between.

The present economic scenario is again infected by the same weaknesses i.e. large fiscal deficits, low expenditure on education and health, chronic electricity and energy shortages, lack of focus on the productive sectors resulting in high inflation, high unemployment and low economic growth. We all want a Pakistan which is economically prosperous, institutionally resilient and strategically oriented. In essence, we want to make Pakistan an economic welfare state. In my view, a key pre-requisite for an Economic Welfare State is to ensure that a country experiences equitable and sustainable growth for a prolonged period of time. Look at the examples of India and China where uninterrupted economic growth has changes the whole value proposition of these countries.------------To reduce our fiscal deficit we will have to increase our taxes. As I have said it many a times, all incomes will have to pay taxes and there cannot be any sacred cows. Agriculturists will have to pay their taxes and so should the retailers, real-estate developers stock-market and all professionals. Our tax to GDP is woefully inadequate at 9pc, where Sri Lanka is 17pc, India 19pc, China 21pc and Turkey 33pc. Before I left the government, there was a tax plan in place, which needs to be implemented. It will require a strong political will.....

Here is a good article from the Express Tribune on some possible reasons WHY Pakistan's Savings Rates are so LOW....

http://alturl.com/5k3kz

Quote: "...Distressingly, the equation does not end here. Eventually, low savings in the economy translate into low investments and thus higher reliance on foreign aid..."

While the ratios & trends are accurate, the specific World Bank numbers quoted in the article are a bit off, probably because the author is including net current transfers. Here are the RAW World Bank domestic savings numbers showing the same ratios & trends:

Pakistan: 9.4% of GDP in 2011http://alturl.com/ku5s5

Bangladesh: 16.3% of GDP in 2011http://alturl.com/h2yu5

Sri-Lanka: 24.5% of GDP in 2011http://alturl.com/zebxq

India: 30.3% of GDP in 2011http://alturl.com/bnufm

What do you think? Is the author right about the importance of domestic savings for stable future growth?

Here's an excerpt from a piece in The Atlantic Cities on economic mobility in US and comparing it with Pakistan:

A 2007 study by the organisation for Economic Cooperation and Development combined a number of previous estimates and found income heritability to be greater in the United States than in Denmark, Australia, Norway, Finland, Canada, Sweden, Germany, Spain, and France. The United Kingdom, which had been far less mobile than the United States during the late nineteenth century, brought up the rear, but this time it was just a bit less mobile than the United States. Thanks to a 2012 recalculation by Miles Corak, an economist at the University of Ottawa, we can now add Switzerland, Japan, New Zealand, Singapore, and Pakistan to the list of societies that are more mobile than the United States.

Here's an ET report on rise in worker remittances to developing world:

Developing countries are expected to receive $406 billion in remittances in 2012, which is 6.5% higher than the remittances they received in 2011, according to a recent World Bank report.

The World Bank projects that remittances to developing countries will grow by 7.9%, 10.1% and 10.7% in 2013, 2014 and 2015 respectively, to reach $534 billion in 2015.

While the international economic downturn has adversely affected remittance flows to Europe and some other regions, South Asia is expected to fare much better than previously estimated, the report says. Remittance flows to South Asia are expected to clock in at around $109 billion in 2012, up by 12.5% over 2011, it said.

According to the State Bank of Pakistan (SBP), the country received remittances of $13.2 billion in fiscal 2012, which were 17.7% higher than the preceding fiscal year.

Similarly, in the first four months of the current fiscal year, remittances to Pakistan stood at $4.9 billion, higher by 15% compared to remittances received in the corresponding four-month period last fiscal year.

“Regions and countries with large numbers of migrants in oil-exporting countries continue to see robust growth in inward remittance flows, compared with those whose migrant workers are largely concentrated in the advanced economies, especially Western Europe,” the World Bank report says.

According to the Bureau of Emigration’s Assistant Director Farrukh Jamal, more than 80% of the manpower that Pakistan has exported resides in Saudi Arabia. “Almost 90% of recent emigrants from Pakistan currently work in the Middle East,” he told The Express Tribune in an interview two weeks ago.

The largest single-country chunk of remittances that Pakistan received in fiscal 2012 – amounting to $1.1 billion – was from Saudi Arabia. It was followed closely by the United Arab Emirates (UAE), with $963.1 million remitted from the country in the same period. The United States ($795.3 million) was the third biggest source of remittances during fiscal 2012...

On a warm Sunday morning in November, Arif Habib leaves his posh home near the seafront in southern Karachi and drives across town in a silver Toyota Prado SUV. About half an hour later, he arrives to check up on his latest project: a 2,100-acre residential development at the northern tip of this city of 20 million. He hops out, shakes hands with young company call-center workers who are dressed for a cricket match, and joins them at the edge of the playing field for a traditional Pakistani breakfast of curried chickpeas and semolina pudding. After a quick tour of the construction site, he straps on his leg pads, grabs his bat, and heads onto the field. “The principles of cricket are very effective in business,” says Habib, 59. “The goal is to stay at the wicket, hit the right balls, leave the balls that don’t quite work, and keep an eye on the scoreboard. I feel that my childhood association with cricket has contributed to my success.”

Habib, who started as a stockbroker more than four decades ago, has expanded his Arif Habib Group into a 13-company business that has invested $2 billion in financial services, cement, fertilizer, and steel factories since 2004. His group and a clutch of others have become conglomerates of a kind that went out of fashion in the West but seem suited to the often chaotic conditions in Pakistan. Engro (ENGRO), a maker of fertilizer, has moved into packaged foods and coal mining. Billionaire Mian Muhammad Mansha, one of Pakistan’s richest men, is importing 2,500 milk cows from Australia to start a dairy business after running MCB Bank, Nishat Mills, and D.G. Khan Cement.

These companies have prospered in a country that, since joining the U.S. in the war on terror after Sept. 11, has lost more than 40,000 people to retaliatory bombings by the Taliban. Political violence in Karachi has killed 2,000 Pakistanis this year, and an energy crisis—power outages last as long as 18 hours a day—has led to social unrest. Foreign direct investment declined 24 percent to $244 million in the four months ended Oct. 31, according to the central bank.

At the same time, some 70 million Pakistanis—40 percent of the population—have become middle-class, says Sakib Sherani, chief executive of Macro Economic Insights, a research firm in Islamabad. A boom in agriculture and residential property, as well as jobs in hot sectors such as telecom and media, have helped Pakistanis prosper. “Just go to the malls and see the number of customers who are actually buying in upscale stores and that shows you how robust the demand is,” says Azfer Naseem, head of research for Elixir Securities in Karachi. “Despite the energy crisis, we have growth of 3 percent.”

Sherani of Macro Economic Insights estimates the middle class doubled in size between 2002 and 2012. “Those who understand the difference between the perception of Pakistan and the reality have made a killing,” Habib says. “Foreigners don’t come here, so the field is wide open.” The KSE100, the benchmark index of the Karachi Exchange, has risen elevenfold since mid-2001. Shares in the index are up 43 percent this year alone. Over the past decade, stocks have been buoyed by corporate earnings, which were bolstered in turn by rising consumer spending.---------Today, Habib has 11,000 employees and annual revenue of 100 billion rupees. He plans to expand into commodities trading and warehousing. “I’ve created all my wealth in Pakistan and reinvested all of it here,” says Habib, who drives himself to his cricket matches and is never accompanied by security guards. In 1998, when Pakistan’s share index fell to a record low after the government tested nuclear weapons, Habib bought shares even though “people thought I was mad.”...

^^RH: "..the decade of 1990s, now appropriately remembered as the lost decade..."----

The International Monetary Fund (IMF) has projected Pakistan's economic growth at 3.25 percent in 2012-13, which it said is insufficient to achieve significant improvement in living standards and to absorb the rising labour force.

Real GDP growth over the past four years has averaged only about 3 per cent annually, and is projected to be about 3.25 per cent in 2012-13, insufficient to achieve significant improvement in living standards and to absorb the rising labour force," the IMF said in its report on Pakistan.

Noting that Pakistan's economy faces many challenges, the IMF said deep seated structural problems and weak macroeconomic policies have continued to sap the economy's vigour.

A key structural impediment to growth is the problems in the energy sector, which have resulted in widespread and unpredictable power outages, IMF said.

"Headline inflation has decelerated recently, but is likely to return to low double digits by the end of 2012-13.The external position has weakened substantially, as export growth turned negative in 2011-12 while imports grew," the IMF said. The financial account has also deteriorated, reflecting weak financial inflows and debt repayments. This has led to a decline in the State Bank of Pakistan's (SBP) foreign exchange reserves to under USD 10 billion in October 2012, below adequate levels, it said.-------------------

Dr. Haq,

What do you think are the chances of another LOST DECADE?

Here are the data for the last one and the data for the one that could potentially be upon us.

A. As you very well know, inflation has declined considerably over the past five to six months; from 12.3 per cent in May 2012 to 7.7 per cent in October 2012. Also, the pace of decline in inflation has been faster than our earlier estimates. Therefore, we are quite confident that inflation may remain below the target of 9.5 per cent for FY13. We discussed this assessment in the monetary policy statement of October 2012 as well. Currently, we are in the process of updating our inflation outlook in the light of latest developments. All I can say is that the likelihood of meeting the inflation target for FY13 remains quite high.

Q. Without additional foreign inflows, and IMF repayments, is the BOP situation under control?

A. In the first four months of FY13, balance of payment position has shown significant improvement over the last year.

Particularly, the external current account balance has turned into a surplus; $258 million, against a deficit of $1.7 billion in the corresponding period of last year. In the remaining months of FY13, we are expecting a deficit in the external current account.

However, this would remain moderate compared to both international standards and Pakistan’s own economic history.

The developments that need to be monitored carefully are those related to financial inflows. For the overall health of balance of payments, it is important that all the budgeted financial flows materialise. In case of shortfall or delays, the BOP may experience some stress, but, at this point in time, we expect the position to remain manageable during FY13. We do not foresee any difficulty in the repayment of IMF loans and other debt obligations that have already been factored in.

Q. Why, then, is the rupee constantly under pressure?

A. Like in most emerging economies, the day-to-day value of the currency in Pakistan is essentially determined by market forces of demand and supply of foreign exchange. While export receipts, remittances and financial inflows are the main sources of supply of foreign exchange; import payments, financial outflows and debt repayments influence the demand. The overall macroeconomic conditions such as inflation relative to trading partners and other factors like perceptions of economic stability also influence the behaviour of participants in the foreign exchange market. The SBP does not target any specific level of exchange rate. Our interventions in the foreign exchange market are essentially geared towards dealing with excessive volatility to ensure smooth functioning of the market.

As I have mentioned earlier, the trade balance together with remittances is in surplus during the first four months of FY13. It is the weak financial inflows that are creating some pressure in the foreign exchange market. As the budgeted financial inflows are realized in the coming months, the situation would become more manageable.

The World Bank has revealed that foreign investment in Pakistan has declined by $4.13 billion during the four years of the present government. This was revealed in a fresh report — ‘World Investment and Political Risk’ — of the World Bank.

The report said that there was a continuous trend of decrease in foreign investment in Pakistan and a conspicuous decline was recorded in the tenure of the present government. It noted that $4.13 billion investment decrease has been recorded from 2008 to 2011.

The report said that $5.44 billion foreign investment was made in 2008 in Pakistan which is continuously falling, and had reduced to only $1.31 billion in 2011. According to the report, $5.59 billion foreign investment was made in Pakistan which is the biggest ever investment made in the country.

In 2009, the investment reduced to $2.34 billion which further reduced to $2.02 billion in 2010. The report said that the foreign investment had also declined in India, however, there is an upward trend now.

The sources added that the USA,UK,UAE,Hong Kong,Switzerland, germany, Netherlands, Norway,Saudi Arabia, Japan were the major investing partners in the country.

They further said that Pakistan during the financial year 2011-12 had also witnessed an FDI inflows of US $ 1.4 billion.

The said that foreign investment inflows increased 49.6 percent in total foreign investment during July-October 2012-13 as compared to the corresponding period while major FDI inflows in transport sector were $60.7 million in October 2012-13

They added that global economy liberalized during 1980s and the government encouraged private sector business initiatives and FDI and cross borders investment by multinational companies (MNCs) gathered momentum.

Here's a Daily Times story on a report about Pak stocks and bonds historic performance:

Magnus publishes first comprehensive study on Pakistani stocks and bonds

KARACHI: The first comprehensive study about returns of stocks and bonds in Pakistan has been recently published by Magnus Investment Advisors Limited. The research provides data for equities starting July 1965 and for bonds starting January 2001. The study shows that long term real Pakistani rupees return (after inflation adjustment) on local equities ranges between 4.82 percent to 5.69 percent. The treasury bills have provided negative returns. The real return on 5 year and 10 year PIBs is 2.19 percent and 3.43 percent respectively. The study also provides nominal and US dollar returns. Issues such as 'Equity Risk Premium' and relevance of 'Purchasing Power Parity' in the context of local securities market are also dealt with. The study also provides an asset allocation frame-work for local trustees. The most interesting part is the analysis of equity returns in Pakistan with other emerging markets and investment in Pakistani equities from the perspective of foreign investors. The study conclusively demonstrates that Pakistan stocks do not represent any unusual risk in the universe of emerging markets. Pakistani stocks should get one of the highest allocations among emerging markets from the perspective of US investors. The study is not only useful for local trustees of retirement funds and charitable institutions but it also fills a major gap for local business schools where so far graduates had little knowledge and understanding about risks and returns of local capital markets. The study is also a useful read for the Ministry of Finance, SECP and BoI officials who are called upon to promote investment in Pakistan from time to time. Magnus is a boutique investment advisory firm based in Karachi. It acts as an investment advisor to retirement funds sponsored by large companies (mostly MNCs) in Pakistan.

The Governor, State Bank of Pakistan (SBP), Yaseen Anwar, has outlined the Central Bank's 10-point banking strategy for the growth of the financial system in the country.

This strategy focuses on implementing a financial inclusion programme for underserved economic sectors of the country, to strengthen consumer protection through legislation and codes of conduct and strengthen competition and efficiency with greater transparency as well as to consolidate the banking sector's corporate governance and risk management practices.

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He said the State Bank's constant monitoring of the banking sector's portfolio has meant that today our banks are profitable, extremely healthy and robust. --------

Yaseen Anwar said the World Bank, and renowned publications, the Financial Times and The Economist, have recognized the State Bank's role in promoting innovative solutions, especially in microfinance, to get more people into the banking sector.

SBP Governor said the State Bank regulates the economy as a whole by using monetary policy instruments, which are transmitted through the financial sector.

`The potency of our monetary policy instruments depends on how many people are actively using formal channels of borrowing and lending', he added.

The SBP chief said the State Bank's monetary policy tools have become much more potent since the introduction of secondary markets that trade government securities, and the removal of distortions from within these markets.

Explaining as to how monetary policy works in Pakistan, Yaseen Anwar said that monetary policy tools target the interest rate.

`It's important to understand just how they do that. Different central banks use different tactics, but at the State Bank, we intervene primarily in the overnight interbank market.

This is the market where interest rates on loans that banks make to each other for a day. The central bank itself is a player in this market and steps in to either provide funds in times of need or drain money in times of excess. By doing that it manages the overnight rate to keep it within a certain band.

The monetary policy rate that is announced in the press indicates the ceiling of this band. The overnight rate is linked to all other interest rates in the market. By changing the ceiling of the band, which the overnight rate fluctuates in, the central bank is able to influence interest rates', he added.

The SBP Governor pointed out Pakistan has never undergone a bout of hyperinflation but the past few years have seen higher than average inflation, the effects of which every individual has felt.

Inflation has reduced markedly in the past few months, he said and added: `It was because of this that the Bank decided to reduce its interest rate as well. The benchmark rate now stands at 9.5 percent.

We also expect that average inflation for the year will remain below 9.5 percent. A part of the reduction in inflation may be attributed to State Bank's active monetary management policies'.

He said the State Bank also ensures that the money market is never short of, or in excess of funds, and this means that monetary policy signals are transmitted efficiently.

He recalled: `Our equity market has been a consistent feature in Asia's best performing stock markets. Since we established a secondary market that can buy and sell government debt, our financial markets have become a lot more agile and responsive to policy changes. That's actually been one of the most important outcomes of the financial sector's reformation'.

The affair of the printing press highlighted the biggest problem being faced by Pakistan. India, which had finally been recognized by the British government as the successor state on 17 June after further pressure from Mountbatten, would simply take over a going concern with everything in place. Pakistan, on the other hand, would be starting from scratch without any established administration, without armed forces, without records, without equipment or military stores.

As early as 9 May, during his stay in Simla with Nehru, Mountbatten had admitted the problem. "What are we doing?" he had asked then. "Administratively, it's the difference between putting up a permanent building, a nissen hut, or a tent. As far as Pakistan is concerned, we are putting up a tent".

The Punjab government has spent just Rs70 billion of its Rs250 billion development budget for fiscal 2012-13 in the first seven months of the year, around half of it in Lahore alone, The Express Tribune has learnt.

Under finance rules, the Punjab government should have spent around Rs145 billion on development by the end of January, but had only spent Rs70 billion. Of this, Rs34.19 billion was spent on projects in Lahore, the vast majority of it, Rs31 billion, on the Metro Bus Service.

A senior Finance Department official said it was normal for utilisation of the Annual Development Programme (ADP) to remain low in the first six months of the financial year, and for spending to pick up in the remaining six months. He said that the low utilisation was due to the poor financial position of the province.

Last year, the Punjab government utilised only Rs150 billion of the Rs220 billion ADP presented for 2011-12.

In Lahore in 2012-13, apart from the spending on the Metro Bus Service, the Punjab government has spent Rs1.65 billion on the Kalma Chowk underpasses and Rs540 million on the Model Town underpass. Another Rs1 billion came out of the provincial kitty for the purchase of 100 buses, originally meant to be plied on the MBS corridor, but later given to girls colleges.

Other notable expenses included Rs4 billion for the procurement of 100,000 laptops, which are being handed out to students who perform well in exams. The Energy Department spent Rs2.5 billion on solar lamps, being handed out to 240,000 students under the Ujala programme.

Around Rs1.447 billion has been spent on the Pirwadhai Mor underpass and flyover project.

Another Rs1.25 billion has been spent on the Abdullahpur underpasses in Faisalabad, which involved the construction of three underpasses beneath the Tariqabad bridge leading to Chak Jhumra Road.

Here's a Daily Times report on State Bank Governor Yaseen Anwar's assessment of Pak economy:

KARACHI: Pakistan’s economy has the ability to navigate through choppy waters and the economic potential this country holds encourage all to become a part of the country’s future.

The Governor State Bank of Pakistan (SBP) Yaseen Anwar at Pakistan Navy War College Lahore said while our current economic situation was less than optimal and it was also very far from what might be described as an economic calamity.

Anwar said in 65 years, Pakistan has never gone through an episode of hyperinflation, Pakistan has never defaulted on its international and domestic debts, in fact our economy has grown consistently, but not spectacularly, over the past six decades.

This has been despite periods of international alienation and sanctions, three expensive wars, two hostile fronts, regular political upheaval, social unrest, sharp increases in the price of oil, and much, much more, he added.

State Bank has always ensured that the financial system of the country remains safe and stable. The robustness of our financial system is a direct consequence of the reforms process and the State Bank’s constant vigilance, he said.

There is a lot that can be improved in our financial system. He called for the development of efficient debt markets, even better regulatory and reporting practices and the broadening of the financial sector’s scope to include largely unbanked sectors of the economy, such as agriculture, small and medium enterprises and housing.

‘Despite this wish-list, the fact remains that our financial system is, by design, secure and does not pose any threat to the economy as a whole,’ he added.

The size of Pakistan’s undocumented economy is by some estimates, as large as the formal economy. The informal economy does not file taxes and while it does absorb a significant chunk of the labour force, it also evades corporate and labour laws, he said.

Although close informal relationships do make the economy more resilient, they do so at a cost to the overall economy, by eroding the ambit of the regulators.

He stressed the need for the greater integration of country’s domestic market with global markets but observed it does not mean that we should not have proper controls and mechanisms in place to safeguard our own interests. ‘Greater integration with financial markets will mean that capital will flow more quickly through our borders. It’s definitely something that will boost the national economy, but, as most East Asian countries learned in the 90s, it can be a double-edged sword.

Therefore having some capital controls in place, which reduce the volatility of capital flows, is a necessary regulation in this day and age, Anwar added.

More effective regulation is the need of the hour for our own economy, he said, adding it is an essential part of what is needed today to get the economy on a track for steady and sustainable growth.

He said the government’s footprint in some sectors of the economy was very large and quite negligible in other sectors.

Such divergence is unhealthy. Effective regulation is sorely lacking in other sectors. The tax machinery can be tightened considerably. One of the country’s most challenging problems today is the size of the fiscal deficit-and a large part of the solution lies in increasing our tax base by enacting regulation that encourages tax compliance, and punishes tax evasion, he added.

The government will need to borrow less money from the central bank. Borrowing from the central bank is popularly known as printing money, he said, adding if government borrowing from the central bank falls, inflation will follow suit.

Therefore, better tax collection is a necessary condition for faster economic growth. And for that we need to have more effective tax regulation, he added.

The condition of an economy is often confused with the financial health of its government. Pakistan's economy is perceived to be in a deep hole because of its near-bankrupt fiscal conditions. Similarly, America's inability to settle on a national budget is taken to be an indicator of the collapse of the US Empire.

In some ways, the condition of the economy and the financial health of the government are separate matters. Major stock market indexes at Karachi Stock Exchange and the Wall Street are at their highest level, but both governments are facing serious financial problems. Most of the countries around the world are facing similar dichotomous situations. So how does one solve the riddle of the corporate sector making record profits while governments around the world are in serious financial jeopardy?

The phenomenon needs to be analyzed at grass-roots level. A shopkeeper from my village comes to mind. He told me that he sells PTCL internet cards grossing about Rs 9,000 every day. There are several other such shops in the village. That means that just in one village, the total sale of PTCL internet cards is up to 50,000 rupees. This consumer item was not present five years ago, which means hundreds of computers have been bought in the village recently. Furthermore, if such luxury products are making such huge profits for village shops, traders throughout the country must be making much larger profits selling essentials every day. One of the indicators of booming business in our village is that the United Bank branch in the village is doing very well, according to its manager.

There are thousands of such villages in the country, and that gives one an idea of the mammoth growth of rural markets. Such an undocumented economy is not even factored in estimating the economic growth of the country. From these supposedly marginal markets, one can extrapolate the profits of the corporate sector in towns and cities.

It may be astounding for some that Pakistan's banking sector is considered fourth in profitability in the entire world. Producers of other major industrial and agricultural products are also making huge profits. Cement, fertilizer, automobile, construction and telecommunication industries are doing extremely well. Other than the textile industry, which has been hit by power shortages, there is hardly any manufacturer or importer/exporter of any kind of goods who is not making money. The stock markets look at the profits of these industries and price them accordingly. Therefore the claims of Pakistan's economic growth are not a fairy tale. The evidence is out there in the market.

The government is also like a large corporation whose income depends mainly on tax revenue. Most of the goods and services (such as roads, defense, education and health) provided by the government are public goods which are not priced directly. The government has to price its public goods through direct taxes on income and sales, or indirectly. Following a certain brand of capitalism, countries like Pakistan and the US are not collecting enough taxes to cover the cost of public goods. They have failed mainly in collecting direct taxes on income. While Pakistan cannot implement an appropriate tax collection mechanism because of corruption, the US has leaned towards favoring high income groups and ended up in a jam. The net result is the same: the rich are getting richer, appropriating most of the new wealth generated....

Here's how PPP boasts of its record of the last 5 years, as reported by PakistanToday:

The Pakistan People’s Party on Saturday released a 29-point report on its five year performance, highlighting major achievements during the period.It makes special mention of the constitutional reforms, particularly the 18th, 19th and 20th amendments which provided provincial autonomy, transfer of presidential powers to parliament, smooth installation of caretaker governments and striking down of president’s power to dissolve the assemblies.Munir Ahmad Khan, the PPP in-charge policy and planning cell, presented the report before the media at a press conference. He said that credit goes to the PPP for ensuring independence granted to the Election Commission of Pakistan.Khan also came up with a list of important decisions and steps taken by the PPP government to mitigate sufferings of the people despite terrorism in the country.In this regard, he mentioned a record increase in wheat production, increase in salaries of govt officials up to 158 percent, disbursement of Rs 70 billion among 7.5 million deserving families through the Benazir Income Support Programmed and financial help to 135,000 deserving people by Pakistan Baitul Maal.On steps taken by the government for economic revival, Khan cited the Pak-Iran agreement on the gas pipeline, agreement with China on Gwadar Port, increase in foreign exchange reserves from $6 billion in 2008 to $16 billion in 2013, increase in export from $18 billion in 2008 to $29 billion in 2012, boost in stock market from 5,220 points in 2008 to 18,185 points in 2013 and reduction in interest rate from 17 percent in 2008 to 9 percent in 2013.He believed that these measures would help improve the economy and ameliorate the people.Talking about the measures taken to increase production of electricity, the PPP leader told reporters that the PPP-led government added 3,600MW of electricity to the system besides initiating additional work on Mangla and Tarbela dams for increase of 4,500MW in the system.The previous government, he added, also got $3.5 billion for Basha Dam, initiated Neelum-Jhelum, Gomal and Satpara dams and Thar Coal project to get electricity from coal besides Jamphar project to get electricity out of air.He said further the PPP government also reinstated thousands of government servants who were dismissed during the last 13 years and also regularised thousands of contract employees.Among steps taken by the government for welfare of the masses, Munir Khan listed resumption of trade union activities, distribution of shares among 500,000 industrial workers, cheep tractors to farmers through Benazir Tractor Scheme, increase rural economy from 50 billion in 2008 to 800 billion rupees in 2013.He said Faisalabad-Multan Motorway and construction of thousands of kilometres of roads.

Ultimately the economic or material base of a society determines its politics and other societal forms and manifestations. Most certainly this adage is as true today as it was in the past, and nobody put it better than Bulleh Shah:

(Islam comprises five pillars of faith, but the sixth is food/If the sixth is not available the five pillars crumble.)

Two of Pakistan’s senior most economists, Rashid Amjad and Shahid Javed Burki, have in cooperation with a galaxy of respected experts — Parvez Hasan, Afia Malik, Hamna Ahmed, Naved Hamid, Mahreen Mahmud, Hafiz A Pasha, Aisha Ghaus-Pasha, Ehtisham Ahmad, Shahid Amjad Chaudhry, Ishrat Husain, Khalil Hamdani, M Irfan, G M Arif, Muhammad Imran, Sara Hayat, Eric Manes, Azam Chaudhry, Theresa Chaudhry, Muhammad Haseeb, Uzma Afzal, Akmal Hussain and Khalid Ikram — taken up cudgels on behalf of the citizens of Pakistan for a programme of change and transformation. This if pursued with sincerity and discipline can help Pakistan achieve the necessary break with the sordid past of missed opportunities and spoilt chances of the last 66 years. No doubt Pakistan is in dire straits at present.

The book under review is a comprehensive, all-round evaluation of the Pakistani economy. It identifies its weaknesses and bottlenecks as well as proposes practical solutions imperative for sustainable recovery. The clarion call is for fundamental structural change. I have yet to see something comparable in terms of quality scholarship assembled in a brief that favours the primacy of economics over vain ideological state building.

I was pleasantly surprised to learn that even in the worst of circumstances the Pakistani economy had been growing at 5.2 percent annually during 1960-2010. The situation is bad since then but there are some impressive developments. Pakistan is performing better than even Bangladesh when it comes to microfinance while private initiative is helping education go forward significantly.

However, investment has fallen dismally. Therefore, the investment climate and the constraints imposed by a woefully bad energy crisis have to be tackled with determination in order to attract foreign and domestic investment. The article on energy is rigorous and informative, but the need to tap alternative renewable energy sources is not sufficiently emphasised. Pakistan should be ideally suitable for solar energy technology. Needless to say, proverbial corruption and mismanagement of our meagre resources are a great shame. Defence expenditure has to be reduced. It is a huge drain on national resources. A very strong emphasis is laid by the experts on the rule of law, transparency and institution building. Equally, a very powerful argument is developed in favour of inclusive growth by Akmal Hussain.

Attention is also given to the menace of unbridled population growth. Strong emphasis on an effective taxation policy is also made. Regional disparities need to be addressed in the light of the 18th Constitutional Amendment, which presupposes a greater role of provincial economic managers, argues Khalid Ikram. Shahid Amjad Chaudhry highlights the urgent need to tackle the issue of water scarcity and replenish the Indus Water Irrigation System, the “heartthrob of the Pakistan economy”. This is a most timely intervention indeed....

Pakistan is returning to the international bond markets for the first time in six years, joining a host of other emerging market governments and companies who are selling debt while borrowing costs remain low.

Pakistan's offering, expected to be up to $1 billion, comes as money flows back to Asia in search of higher yields amid new expectations that the U.S. Federal Reserve will now keep in place for the time being the aggressive stimulus measures that has pumped the world full of cash.

Other countries such as Brazil, Kenya and Honduras are also raising cash to fund infrastructure projects and alleviate heavy debt burdens.

Interest in emerging markets, including their sovereign debt, has been renewed in the past couple of months as the Fed has held off starting to wind down its bond-buying program, said Mr. Rajeev DeMello, head of Asia fixed income in Singapore at Schroders Investment Management, which manages $388 billion globally.

Mr. DeMello said Schroders holds Pakistani bonds and expects the new debt to attract investors, given that it will offer a high yield and that the country's bonds are not highly correlated to those of other markets in the region.

During the summer selloff in global emerging markets, prompted by expectations that the Fed would soon begin withdrawing its stimulus program, Pakistani bonds held up relatively well because most holders are large institutional investors with longer-term outlooks, Mr. DeMello said.

With global interest rates still low and emerging market investors venturing back into Asia, the country is planning to issue debt due in five to 10 years.

Bond yields throughout Asia have fallen over the last few weeks as investors have jumped back in. The yields on government bonds in Indonesia, Malaysia and Thailand have all fallen since early September.

Pakistan's five-year yield is at 12.3%.

"We have started the process [of the bond sale] and are waiting for the appointment of a lead adviser who will take the process forward," said Shafqat Jalil, a finance ministry spokesman.

Still, Pakistan isn't without its problems. Though its economy is humming, its finances are weak, with revenues from taxes floundering and foreign-exchange reserves falling 34% since October last year. Pakistan is already heavily in debt, with its financing needs one of the highest in emerging markets, according to the International Monetary Fund. Rating firm Moody's MCO +1.08% downgraded the country's government bonds to junk in July last year.

The Pakistani government is raising cash to plug its dwindling foreign-exchange reserves, which are symptomatic of the country's economic woes and trade imbalance.

The government's financial history hasn't been without blemishes, either. It last defaulted on debt in 1999 as it struggled with a balance-of-payments crisis aggravated by international sanctions and a military coup.

Pakistan last issued debt in 2007, with $750 million of 10-year bonds intended for general government spending and budget management. At the time, investors snapped up the bond with bids worth seven times the amount of debt on offer.

KARACHI: Pakistan has seen significant increase in the number of wealthy people as compared to a total of approximately 22 families during the era of Field Marshal General Ayub Khan in 60s, experts told The News.

According to a study of a financial think-tank from Switzerland, there are 415 people in Pakistan, who own more than $30 million each as compared to 310 last year, registering an increase of 33.9 percent, which is a record in Asia. Collective income of these people remained around $50 billion, the study revealed.

Only seven to eight business groups of the 22 families continue to operate their businesses significantly and the remaining families have either closed their businesses or have shifted abroad.

Dr Ishrat Husain, former governor of the State Bank of Pakistan (SBP), and a renowned economist, said only Dawoods, Adamjees, Sehgals, Shaikhs, Nishats and a few others have survived the economic ups and downs during this period, while Haroons, Batlas, Valikas, Isfahanis, Noons, and Rangoonwalas, have disappeared from the economic scene.

The nationalisation process in 70s also affected their economic position, he said, adding that some of the families went abroad and later shut their businesses due to one reason or the other. “Disputes and rivalries within the family and group also forced them to wind up their businesses,” Dr Husain said.

In 1947, the first budget projected a revenue of Rs150 million and the government had to borrow Rs80 million from the Habib Bank Limited to pay salaries to its employees and meeting other contingencies.

Likewise, Dentonic tooth powder was the first industrial project launched in the country followed by the inauguration of the first soft drink, Pakola, which was launched by the then prime minister.

Dr Riaz Shaikh, head of Social Sciences at Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST), said that several well-established individuals and families had emerged after the nationalisation process initiated by Zulfikar Ali Bhutto. “Now the number of such individuals and families has increased to hundreds, if not thousands,” he said.

Families of Agha Khan, Kasuri that owns a school chain, Patel family that owns hospitals and Malik Riaz, top real estate developer, along with several others are some of them. ----A few top families in the list included Sehgals, Habibs, Dawoods, Adamjees, Crescent and Valikas. ---------------(Shahid) Rahman wrote that nationalisation retarded Pakistan’s growth in many ways but its worst consequence was the scars inflicted on the psyche of the big businesses, which were flourishing even after passage of two decades. “It alienated the industrialists from the economic mainstream and, as if by a collective decision, several of the original 22 families who pioneered development in Pakistan switched off investment in the long gestation projects,” he wrote.

The Pakistani businessmen who were planning mega projects in 1971 and are still capable of setting up mega projects resigned to remain spinners, sugar manufacturers or at best cement manufacturers.

Field Marshal Ayub Khan’s decade of development (1958-68) divided the society into two categories, privileged and underprivileged, which led to the explosive situation of the 1970’s, culminating in the severance of Pakistan and induction into power of a socialist government of Bhutto.

The second phase, (1971-77) under Pakistan People’s Party was the era of dismantling monopolies, nationalisation, hitting at the power base of industrial barons and clipping their wings, while 11 years rule of General Zia-ul-Haq was the period of status quo for the economy....

Recently, Jim O'Neill, one of the most renowned British economist predicted that Pakistan could become world's 18th largest economy by 2050 and its per capita income will cross the 20,500 dollars mark with its GDP around US$ 3.33 trillion in 2050. This means that Pakistan's economy will grow 15 times more than what it stands today within the next 35 years.

Jim became famous for analyzing and coining the world's most powerful economies in a single term, 'BRIC' meaning Brazil, Russia, India and China in 2001. He recently developed another term, 'MINT', meaning Mexico, Indonesia, Nigeria and Turkey and has projected them to be coming up as strong economies in the coming decades.

Currently, Pakistan is ranked the 44th largest economy of the world with GDP of US$ 225.14 billion. If Jim O'Neill's predictions turn out to be true, Pakistan's economically sound conditions can be fruitful for the country's development. Not just this but it can also lead to amicable living conditions for its people and can lead to smooth social atmosphere there.

Other than the 2050 predictions, we should not forget about the serious economic challenges being faced by Pakistan currently. International Monetary Fund signed a financial assistance of USD 6.7 billion to save the country from falling into the periphery of an economic collapse back in September 2013. The energy sector is a cause of severe poverty and growing labour force. Pakistan has failed to develop a variegated economy. Pakistan will need to boost up its confidence in order to attract FDIs, said IMF.

Terrorism is another reason behind the slower economy of Pakistan. It has damaged the image and the economy of Pakistan on numerous levels. Normal business and tasks require more time and extra security due to the challenge of terrorism. Terrorism leads Pakistan to have an extra expenditure on humanitarian aid, law and order and various other fiscal, economic, cultural and social charges.

Pakistan's economic circumstances have different root causes and solutions to those causes are demanding but a lot has changed over the years. Since 2007, the domestic consumer demand has been rising. Many multinational corporations have brilliantly performed in Pakistan. The Pakistani markets have proven to hold better potential than the African markets. It has also been said that if the job crisis in Pakistan is resolved, its economy will outdo the economies of many other countries.

"It would be a great achievement for Pakistan if Jim's predictions turn out to be true. Pakistan will then be entering into the positive spheres of world economics. This will be beneficial for the country," said Sukriti, a student of English Honors who holds high interests in economical issues of the world.

"If Pakistan is able to achieve the mark of GDP US$ 3.33 trillion, then nothing like it. It will be a great achievement not just for Pakistan but also for the neighboring countries. The economical ties will bolster and not just Pakistan but all the surrounding countries will flourish with it," said Arushi, a student of Jesus and Mary College.

Pakistan's growing economy will be a big challenge for the other economies of the world.

Pakistan is a rapidly growing country despite a lot of political and economic challenges. However, its growth rate since 1947 has been better than the global average. A wide range of economic reforms has resulted in a strong economic outlook. There has been a great improvement in foreign exchange and currency reserves. New businesses are opening up across Pakistan which is reshaping its landscape.The GDP growth accelerated to 4.14 percent in 2013-14 and the momentum of growth is broad based, as all sectors namely agriculture, industry and services are supporting economic growth. The per capita income in dollar terms has reached to $1,386 in 2013-14.The agriculture sector accounts for 21.0 percent of GDP and 43.7 percent of employment. It has strong backward and forward linkages. It has four sub-sectors including: crops, livestock, fisheries and forestry.The industrial sector contributes 20.8 percent in GDP; it is also a major source of taxrevenues for the government and also contributes significantly in the provision of job opportunities to the labor force. The government has planned and implemented comprehensive policy measures on fast track to revive the economy. As a result, Pakistan’s industrial sector recorded remarkable growth at 5.8 percent as compared to 1.4 percent in the previous year.The services sector contains six sub-sectors including: transport, storage and communication; wholesale and retail trade; finance and insurance; housing services (ownership of dwellings); general government Services (public administration and defense); and other private services (social services). The services sector has witnessed a growth rate of 4.3 percent. The growth performance in the services sector is broad based, all components contributed positively in growth, Finance and insurance at 5.2 percent, general government services at 2.2 percent, housing services at 4.0 percent, other private services at 5.8 percent, transport, storage and communication at 3.0 percent and wholesale and retail Trade at 5.2 percent.The three main drivers of economic growth are consumption, investment and export.Pakistan has a consumption-oriented society, like other developing countries. The private consumption expenditure in nominal terms reached to 80.49 percent of the GDP, whereas public consumption expenditures are 12.00 percent of GDP.The government has launched a number of initiatives to create enabling environment in the country including steps to improve the energy situation, law and order, auction of 3G and 4G licenses, and other investment incentives for the investors.Moody’s recent ratings in favor of Pakistan coupled with jacking up from negative to positive rating of five of its banks — Habib Bank Limited (HBL), Muslim Commercial Bank (MCB), Allied Bank Limited (ABL), United Bank Limited (UBL) and National Bank of Pakistan (NBP) — would definitely boost investor confidence.The current government has launched a comprehensive plan to create an investment-friendly environment and to attract foreign investors to the country. As is evident, the capital market has reached new heights and emitting positive signals for restoring investor confidence. The European Union (EU) granted Generalized System of Preferences (GSP) Plus status to Pakistan with an impressive count of 406 votes, granting Pakistani products a duty free access to the European market. The GSP Plus status will allow almost 20 percent of Pakistani exports to enter the EU market at zero tariff and 70 percent at preferential rates. Award of GSP Plus status depicts the confidence of international markets in the excellent quality of Pakistani products.Pakistan emerged as one of the best performers in the wake of the global financial crisis, even with a backdrop of a country which waged a costly war against militants.

Pakistan is a rapidly growing country despite a lot of political and economic challenges. However, its growth rate since 1947 has been better than the global average. A wide range of economic reforms has resulted in a strong economic outlook. There has been a great improvement in foreign exchange and currency reserves. New businesses are opening up across Pakistan which is reshaping its landscape.The GDP growth accelerated to 4.14 percent in 2013-14 and the momentum of growth is broad based, as all sectors namely agriculture, industry and services are supporting economic growth. The per capita income in dollar terms has reached to $1,386 in 2013-14.The agriculture sector accounts for 21.0 percent of GDP and 43.7 percent of employment. It has strong backward and forward linkages. It has four sub-sectors including: crops, livestock, fisheries and forestry.The industrial sector contributes 20.8 percent in GDP; it is also a major source of taxrevenues for the government and also contributes significantly in the provision of job opportunities to the labor force. The government has planned and implemented comprehensive policy measures on fast track to revive the economy. As a result, Pakistan’s industrial sector recorded remarkable growth at 5.8 percent as compared to 1.4 percent in the previous year.The services sector contains six sub-sectors including: transport, storage and communication; wholesale and retail trade; finance and insurance; housing services (ownership of dwellings); general government Services (public administration and defense); and other private services (social services). The services sector has witnessed a growth rate of 4.3 percent. The growth performance in the services sector is broad based, all components contributed positively in growth, Finance and insurance at 5.2 percent, general government services at 2.2 percent, housing services at 4.0 percent, other private services at 5.8 percent, transport, storage and communication at 3.0 percent and wholesale and retail Trade at 5.2 percent.The three main drivers of economic growth are consumption, investment and export.Pakistan has a consumption-oriented society, like other developing countries. The private consumption expenditure in nominal terms reached to 80.49 percent of the GDP, whereas public consumption expenditures are 12.00 percent of GDP.The government has launched a number of initiatives to create enabling environment in the country including steps to improve the energy situation, law and order, auction of 3G and 4G licenses, and other investment incentives for the investors.Moody’s recent ratings in favor of Pakistan coupled with jacking up from negative to positive rating of five of its banks — Habib Bank Limited (HBL), Muslim Commercial Bank (MCB), Allied Bank Limited (ABL), United Bank Limited (UBL) and National Bank of Pakistan (NBP) — would definitely boost investor confidence.The current government has launched a comprehensive plan to create an investment-friendly environment and to attract foreign investors to the country. As is evident, the capital market has reached new heights and emitting positive signals for restoring investor confidence. The European Union (EU) granted Generalized System of Preferences (GSP) Plus status to Pakistan with an impressive count of 406 votes, granting Pakistani products a duty free access to the European market. The GSP Plus status will allow almost 20 percent of Pakistani exports to enter the EU market at zero tariff and 70 percent at preferential rates. Award of GSP Plus status depicts the confidence of international markets in the excellent quality of Pakistani products.Pakistan emerged as one of the best performers in the wake of the global financial crisis, even with a backdrop of a country which waged a costly war against militants.

It might seem odd that having more money would not help a poor country. Yet economists have long observed that countries that have an abundance of wealth from natural resources, like oil or diamonds, tend to be more unequal, less developed and more impoverished, as the chart below shows. Countries at the left-hand side of the chart have fewer fuels, ores and metals and higher growth, while those at the right-hand side have more natural resource wealth, yet slower growth. Economists postulate that this "natural resource curse" happens for a variety of reasons, but one is that such wealth can strengthen and corrupt a government.

Like revenue from oil or diamonds, wealth from foreign aid can be a corrupting influence on weak governments, “turning what should be beneficial political institutions into toxic ones,” Deaton writes in his book “The Great Escape: Health, Wealth, and the Origins of Inequality.” This wealth can make governments more despotic, and it can also increase the risk of civil war, since there is less power sharing, as well as a lucrative prize worth fighting for.

Deaton and his supporters offer dozens of examples of humanitarian aid being used to support despotic regimes and compounding misery, including in Zaire, Rwanda, Ethiopia, Somalia, Biafra, and the Khmer Rouge on the border of Cambodia and Thailand. Citing Africa researcher Alex de Waal, Deaton writes that “aid can only reach the victims of war by paying off the warlords, and sometimes extending the war.”

Ali. How do you compare the economic policies of different civilian and military regimes in the recent past?

Husain. I would say 2000–2002, when we had a cabinet of technocrats, was the best period of economic management in Pakistan’s history. It was during that period that all the tough reforms – including those in the structure and administration of taxes – were introduced. The period between 2003 and 2006 was reasonably good because the momentum for growth had been created earlier. International confidence in Pakistan’s economy was high and the Foreign Direct Investment flows were at their peak.

The turning point came in 2007, with the announcement of elections, judicial issues and the Lal Masjid episode. In 2008, there was tension between Musharraf and the army on the one hand, and the new civilian government on the other. The government in power between 2008 and 2013 did not pay much attention to economic management. It changed five finance ministers and five governors of the central bank. When the ship is in turbulent waters, you need strong hands on the wheel to bring it to shore safely. We had an economy in trouble between 2008 and 2013 but there was no one minding the store. That created a lot of problems. We did not even implement conditionalities of the International Monetary Fund loan programme.

The current government at least has a very clearly designated steward of the economy. You may disagree with him, but at least we all know somebody is minding the store.

Ali. Why can’t we catch tax evaders?

Husain. When Abdullah Yusuf was heading the Federal Board of Revenue (FBR), tax administration was doing well. The moment the government removed him, the whole process turned topsy-turvy.

Also read: Altaf Hussain: Politics on mute

Let me give you a very specific example. The FBR had a merit-based selection process for key postings in the customs and income tax departments. Those selected were given double the usual salary. As a result of this policy, very good people were selected as regional tax officers and they started generating additional revenues.

The new government came in 2008, and the FBR officials who were not hired for those posts went to politicians and said that they were being treated unfairly. The government doubled the salaries of all the officials irrespective of their merit or performance and the old culture was restored. If the merit-based, performance-related evaluation process and compensation system was allowed to continue, I can tell you things would have improved.

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About Me

I am the Founder and President of PakAlumni Worldwide, a global social network for Pakistanis, South Asians and their friends. I also served as Chairman of the NEDians Convention 2007. In addition to being a South Asia watcher, an investor, business consultant and avid follower of the world financial markets, I have more than 25 years experience in the hi-tech industry. I have been on the faculties of Rutgers University and NED Engineering University and cofounded two high-tech startups, Cautella, Inc. and DynArray Corp and managed multi-million dollar P&Ls. I am a pioneer of the PC and mobile businesses and I have held senior management positions in hardware and software development of Intel’s microprocessor product line from 8086 to Pentium processors. My experience includes senior roles in marketing, engineering and business management. I was recognized as “Person of the Year” by PC Magazine for my contribution to 80386 program. I have an MS degree in Electrical engineering from the New Jersey Institute of Technology.
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